SEC v. Ripple: Bombshells in deposition pave the way for win on Fair Notice, says expert

Rick Steves

The ex-SEC Commissioner waffled, according to Mr. Hogan, and then answered “no”.

As fact discovery comes to a close in the SEC v. Ripple lawsuit (see agenda), parts of the infamous William Hinman deposition transcript have been attached to the SEC brief. Attorney Jeremy Hogan analyzed the documents.

“These excerpts of the deposition were of course chosen by the SEC so we don’t see the bad stuff yet but this is our first look at some real evidence in the case and it didn’t disappoint”.

From the probably over 500 pages, only about 90 pages were attached to the brief, and “much of what we do have is redacted”, the XRP-friendly lawyer said in a video, then moving on to two bombshells he found on the transcript.

SEC v. Ripple: Lawsuit will last for “several months, if not longer”, said the SEC

Bombshell Number 1 is on page 376 of the transcript as the former SEC Commissioner said he had his first meetings with XRP representatives trying to figure out how XRP could come into compliance in 2020. Only then did he let Ripple executives and counsel know they were breaking the law.

By then, the SEC’s investigation of Ripple was already underway and the complaint was filed in December 2020. “But also keep in mind that when asked what they could do to come into compliance it seems according to his testimony his only response was to say “stop selling XRP.”

Given the nature of the blockchain space, a burgeoning industry, the lack of fair notice argument gains strength in the eyes of Mr. Hogan, who added that testimony “only really helps the SEC for the period from when Hinman told the SEC in 2020 until the lawsuit was filed. It does nothing for pre-2020 Fair Notice.”

Bombshell Number 2 regards the SEC’s policy for the agency’s employees owning securities which states they can’t own securities they are in any way working with or about to. Moreover, the purchase of any security by an SEC employee had to be pre-cleared.

The Ripple counsel asked William Hinman if digital assets were not covered by the securities clearance form until 2018.

The ex-SEC Commissioner waffled, according to Mr. Hogan, and then answered “no”.

“The SEC did not consider digital assets securities for their ethics purposes until 2018. You never ask a question on cross you don’t know the answer to already. And that bodes very well for Ripple as far as its Fair Notice defense for periods from 2013-2018”, the lawyer concluded.

The fair notice defense is Ripple’s favorite strategy for a win in the SEC v. Ripple case that has been dragging since the complaint was filed in December 2020. Mr. Hogan has recently analyzed both parties’ strategies as they become clearer at the end of fact discovery.

The SEC has warned the court that a Ripple win on fair notice would nullify the ‘Howie Test’ which is used for assessing the nature of an asset and whether it is a security or not.

On the other hand, such win could “save the industry from the SEC” as attorney Hogan previously explained.

 

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