SEC v. Ripple: SEC caught erasing documents relevant to XRP lawsuit

Rick Steves

The transcript is included in the most recent SEC motion in regard to the privilege dispute between the agency and Ripple and individual defendants.

The SEC has filed its opposition to Ripple’s and the Individual Defendants’ Motion challenging the SEC’s improper assertion of the Deliberative Process and other privileges.

The agency’s response to the privilege dispute follows an extensive and frustrating back and forth between both parties as they don’t see eye to eye in terms of what constitutes privileged information.

This has led Ripple’s lead counsel Matthew Solomon to send a letter to Judge Sarah Netburn and request her help in the discovery dispute. Fact discovery is coming to an end but many documents are yet to be delivered (lawsuit agenda).

SEC officials investigated for conflict of interest amid handling of Ripple and XRP

In regard to the recently filed opposition to Ripple’s motion, the SEC argues the deliberative process privilege (DPP) is a critical governmental privilege designed to promote the quality of agency decisions by preserving and encouraging candid discussion between officials.

“The Court should not override that privilege and punish frank governmental deliberations, particularly where the internal pre-decisional, deliberative material Defendants seek, which they never saw or knew about, is not relevant to any claim or defense”.

“Defendants have already sought and obtained an extraordinary amount of discovery from the SEC. Yet, Defendants now claim that privileged, non-public SEC communications about the regulation of digital assets (not just XRP), are somehow so relevant that the SEC’s important deliberative privilege should be overridden”, the plaintiff argued.

“Meanwhile, Defendants have moved to strike on the record the most probative, relevant evidence they have obtained from their SEC discovery: former SEC Division of Corporation Finance Director William Hinman’s deposition testimony that he met with Ripple representatives and told them that he considered Ripple’s sales of XRP to be sales of securities and that Ripple should stop its unregistered sales”.

“The theory behind Defendants’ Motion appears to be that non-public and privileged comments by SEC employees that Defendants never saw, including about digital assets other than XRP, are relevant, but what Director Hinman told Ripple’s representatives
about XRP is not”, the SEC added.

The abovementioned filed motion contains parts of the deposition of ex-SEC Director William Hinman, a much-discussed topic for its potential to change the course of the lawsuit.

Mr. Hinman gave the thumbs up to Ether as a non-security in 2018, resulting in a euphoric market no longer afraid of an SEC complaint about its initial coin offering. The lawsuit could and still can trigger a move against Ethereum.

Ripple confronts SEC for deleting relevant information

The William Hinman deposition transcript seems to indicate that the SEC tried to delete subtopics relevant to the Ripple lawsuit. On page 254, Ripple counsel Reid Figel claimed “it was deleted” and pointed the finger at SEC Special Counsel Michael Seaman.

“What’s the basis of that understanding, Reid?”, SEC lead counsel Jorge Tenreiro asked.

“Our review of the metadata. If you look to — depends on how you present it, but if you go to the second document, it says on some version of it deleted by Michael Seaman”, Mr. Reid replied.

Then, the SEC counsel suggested he asked William Hinman “if he directed Seaman to delete it. I mean, does he remember that”. The former SEC director answered the question with “I don’t recall directing him to do that.”

The deleted portion of the SEC document on page 96 was William Hinman’s answer to the question “Other than the issues with respect to Ripple, can you identify any other lawyers that came to you, not seeking a no-action letter, but seeking guidance with respect to transactions in digital assets?”

Mr. Hinman: “You call ten different law firms, they give you ten different answers, each of them has their own particular spin. It’s like the white light of your speech went through a prism and came out in ten different colors of legal advice.”

This is the latest update to the lawsuit, which recently saw Ripple explaining to the Judge why it refuses to hand over its internal Slack messages to the SEC.

Both parties’ strategies were analyzed by attorney Jeremy Hogan over the weekend ahead of the “Hell Week” as fact discovery ends August 31.

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