SEC v. Ripple key hearing today: John Deaton offers line of questioning

Rick Steves

“If that was not a clear conflict of interest, then he needs to explain why under oath”.

Judge Sarah Netburn will hold a hearing today to discuss the SEC’s motion to quash the deposition of former SEC Division of Corporation Finance Director, William Hinman.

The scheduled telephone call, which was deemed “bad for Ripple” by attorney Jeremy Hogan, is expected to clear the way for the deposition on July 19 following Ripple’s re-notice as the defendant grows impatient.

The SEC argues that Ripple and its co-founders are unable to demonstrate “exceptional circumstances” for the testimony of a high-ranking government official.

John E. Deaton, the attorney who has previously filed a Motion to Intervene in the name of XRP holders, admitted that it is “a big deal to subpoena a former high-ranking official for a deposition in order to answer for his actions while in office”.

But Hinman’s actions were clearly material for a precedent-setting case such as SEC v. Ripple, he stated, arguing in favor of the deposition.

Commenting ahead of today’s hearing, Mr. Deaton offered a “quick, but not exhaustive, review of what XRP holders and crypto holders and investors, in general, deserve to know should William Hinman be permitted to testify under oath”.

His line of questioning would include Hinman’s relations with Ethereum via Simpson Thatcher, in which he is a partner. The law firm sits on the Enterprise Ethereum Alliance, a coalition of organizations devoted to the business case for the Ethereum blockchain.

During his time at the SEC, he said “offers and sales of ether are not securities transactions” in a speech that is still available on the SEC’s website while receiving millions in payments from the law firm while he was at the agency.

“If that was not a clear conflict of interest, then he needs to explain why under oath”, said Deaton, also pointing to a speech three days earlier that the SEC tip-off Hinman’s Simpson Thacher colleagues before the market.

The attorney then pointed to Hinman’s meeting with the Ethereum Foundation after the ETH Speech: “In the discovery phase, Ripple has apparently forced Hinman to admit he met with the Ethereum Foundation, Consensys and other very relevant market participants after his 2018 ETH speech.

“Why didn’t the market know about this before now? Did the man in charge of no-action letters on cryptocurrency offerings discuss his ETH speech in private with these key market participants? Did they discuss rival coins? Let’s have him walk us through all of those conversations under oath.”

In regard to Hinman’s views being just a personal opinion and not policy, Deaton says “nonsense”. Not only the news referred to a senior SEC official declaring that ETH is not a security, but Hinman never personally corrected the record.

The attorney then reminded that Hinman said, later in 2018, that his ETH speech “got a lot of attention because it was the first time we had expressed to the world that we didn’t view ether as a security”.

“We” meant the SEC, pure and simple. Hinman needs to be questioned under oath extensively about all the events leading up to the ETH speech – and afterward – to clearly paint a believable picture as to how this market-shaking speech was just his opinion as a private citizen.”

“And now both Hinman and the SEC want us to believe the ETH speech should never have been interpreted as policy or any kind of notice about ETH’s status, in the same way that the SEC argued in the Ripple complaint in December 2020 that all of us should have known XRP was a security since 2013.”

The whole opinion piece can be found in John Deaton’s blog. The telephone conference is scheduled for today, July 15, 2021, at 3:00 p.m. ET. The public call-in number can be found here.

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