Judge: SEC To Produce Materials On Hinman Speech In Ripple Lawsuit
US Magistrate Judge Sarah Netburn has ordered The US Securities and Exchange Commission (SEC) to produce documents and communications related to a speech by previous SEC director William Hinman, in the Ripple lawsuit.
The lawsuit between Ripple and the SEC started in December 2020, when the US securities regulator filed suit against the distributed ledger tech company and alleged that it conducted an unregistered securities offering by selling XRP. Ripple has fought the case, maintaining that XRP is not a security and that the SEC’s guidance on which tokens constitute securities has failed to clarify rules of the road for crypto firms.
In recent decision, Netburn denied the SEC’s request to reconsider its order compelling the agency to produce documents and communications related to a speech by previous SEC director William Hinman, which included remarks on why he didn’t consider Bitcoin and Ethereum to be securities.
Earlier, the US watchdog argued that the speech consisted of Hinman’s personal views on crypto rather than reflecting an agency-wide policy.
Then, the SEC claimed that the speech actually reflected agency policy, and therefore any emails or communications related to it could be protected under the deliberative process privilege (DPP), in an attempt to to keep notes, drafts and deliberations on that speech out of the courtroom. The DPP allows areas of the government to claim immunity to discovery or disclosure if the communications are about internal processes.
Judge Netburn, wasn’t happy with the SEC’s sudden perspective shift on Hinman’s speech. She wrote in the order:
“The SEC seeks to have it both ways, but the Speech was either intended to reflect agency policy or it was not. Having insisted that it reflected Hinman’s personal views, the SEC cannot now reject its own position. The Speech was not an agency communication, and the deliberations as to its content are not protected by the privilege.”
In the court’s view, Hinman’s speech constituted his personal views, meaning the communications related to it aren’t protected under the DPP. The SEC will have to produce communications related to the speech.
Ripple CEO, Garlinghouse Comments on the Lawsuit
In an interview with CNBC, Brad Garlinghouse commented on the lawsuit with the SEC. Garlinghouse noted that the question is whether or not Ripple sold unregistered securities when it initially offered its XRP token, and the answer to that requires establishing whether or not XRP is a security.
The Ripple CEO said thatthe SEC’s position, which is that Ripple should have been aware that its token was a security at the time, is untenable:
“I think it’s very clear that in the United States the laws have not been clear, and for the SEC then to go back in time and say you should have known all along… it’s a hard case.”
According to Garlinghouse, the SEC has not been providing regulatory clarity, a predominant aspect of the company’s defense. .
