SEC v. Ripple: SEC finds Ripple’s argument “ironic”

Rick Steves

“Defendants are left to argue that Director Hinman was not a high-ranking government official. This is ironic.”

The Securities and Exchange Commission has filed a reply in further support to its motion to quash the defendants’s deposition subpoena aimed at ex-SEC Director William Hinman.

In other words, the SEC wants its former official out of the lawsuit while Ripple Labs and its co-founder believe a lot can be learned from Mr. Hinman’s testimony.

William Hinman has been under much scrutiny since the US financial watchdog came forth with its complaint against Ripple for its role in publicly addressing calls for clarity regarding the status of Bitcoin and Ethereum.

Who is the ex-SEC Director whose deposition the SEC wants to quash? 

Although the SEC states his words were no “official determination”, the crypto industry and markets reacted to his authoritative opinion. Ripple even pointed that out in its opposition to quash the deposition subpoena:

He “himself described the speech as newsworthy. And those watching and listening agreed. The price of ether skyrocketed immediately after the speech”.

“Many have since described the speech as setting forth a new standard separate from, or additional to, Howey. Multiple currency exchanges decided to list XRP after the speech, suggesting it gave comfort that offers and sales of XRP did not run afoul of the securities laws.”

That’s what the SEC found ironic. In its first motion to quash, the regulator reminded the court and the defendants that high-ranking government officials require the high burden of exceptional circumstances to be summoned for deposition.

Ripple didn’t contest that but argued that Mr. Hinman “never was a high-ranking official” while having a unique, first-hand knowledge relevant to the claims and defenses in the case. The SEC replied:

“Defendants are left to argue that Director Hinman was not a high-ranking government official. This is ironic. Director Hinman is the SEC official whose personal opinions about Ether were viewed as “newsworthy” and, Defendants claim, caused a spike in the price of Ether and led to speculation about the future viability of the Howey standard and the legal status of XRP.

“Moreover, Defendants cannot point to a single case where the deposition of an SEC official of Director Hinman’s rank was allowed, nor can they distinguish the many cases where courts quashed the depositions of other similarly-ranked officials”, the letter continued, adding that defendants are thus asking the court to make new law only to ask him about external meetings and internal SEC deliberations that are privileged.

So, the SEC reiterates that the ex-SEC Director was a high-ranking official and Ripple can’t say otherwise. In addition, the regulator argues that he has no unique knowledge of any discoverable facts.

About Mr. Hinman’s speech on the regulatory status of Ether under the US securities law, it was no official determination by the SEC and Ripple does not dispute that, the regulator said.

The ex-SEC Director has been the target of conflict of interest claims for his role in stating that Ether was no security despite its fundraiser in 2014 and then moving to a law firm with direct links to the Ethereum Foundation.

The Ripple lawsuit has added pressure on the SEC to provide regulatory clarity and its ex-officials have been under the spotlight for their professional moves, including ex-SEC Chair Jay Clayton.

This could lead the current administration to be more specific and official about Bitcoin and Ether. And now that the upcoming Ethereum 2.0 upgrade will change the model from a proof of work to proof of stake, ETH2 may be seen more like a security than ever before. At least, according to attorney Jeremy Hogan’s analysis.

 

You might also want to read:

Will the Ripple lawsuit turn against Ethereum with the SEC revisiting its status?

SEC v. Ripple: Why is the lawsuit taking so long?

Can the Ripple lawsuit turn against Ethereum?

 

Read this next

Digital Assets

Despite its legal troubles in the US, Ripple expands elsewhere

Ripple is looking to expand its presence in the MENA region, forming a new partnership with Pyyp, a global blockchain-based financial services technology company. The latter has reportedly joined Ripple’s On-Demand Liquidity (ODL) network, which, among many benefits, allows it to bring instant, low-cost remittances to its customers.

Digital Assets

Ripple’s string of wins analyzed, XRP lawsuit to drag on until Spring 2022

“Absent a settlement, this case will not be decided until March 2022 at the earliest and possibly not even until late spring if the court decides not to rule on some of the pending motions until after the discovery deadline, which looks really possible”.

Industry News

Stripe partners with BNPL giant Klarna

Stripe, one of the largest payment providers in the world, has announced the launch of a partnership with the BNPL giant Klarna which might prove to be a game-changer as far as the buy-now-pay-later industry is concerned.

Retail FX

ADSS’ UK business reports £3.09 million in 2020 revenues, down 38%YoY

ADSS’ FCA-regulated entity reported its financial results for the year ending December 31, 2020. The company posted a revenue figure that was 38 percent lower than the amount it earned in the fiscal year of 2019.

Retail FX

OANDA hires FX Global Code contributor Lisa Shemie as General Counsel

Lisa Shemie was Chief Legal Officer at Cboe and was part of several working groups under the Global Foreign Exchange Committee, which is responsible for the FX Global Code.

Digital Assets

Saxo Bank boosts Crypto FX offering after $2.5b in turnover since May

Saxo increased maximum position limits and several new crypto instruments, including the first ever US Crypto ETF issued by Proshares last week under ticker BITO.

Digital Assets

Tether tests Notabene for AML in cross border transactions

The Financial Action Task Force (FATF) has issued guidelines holding VASPs to the same standards as regulated financial institutions.

Digital Assets

Mobilum upgrades OTC crypto desk for trades above $50,000

Mobilum added a wide variety of crypto assets, fast settlements, no deposit or withdrawal fees, competitive trading fees, and a personalized service with human traders.

Digital Assets

Trakx launches digital asset trading platform in France

Crypto Traded Indices (CTIs) enhance portfolio diversification and reduce the complexity and fees associated with the setting and reach of positions on many digital and cryptocurrency assets.

<