XRP lawsuit: Ripple goes for the jugular with SEC’s contradictions

Rick Steves

“Mr. Hinman’s personal views as to XRP’s status are dubious, in any event, given his testimony that not all of the factors laid out in Howey need to be met to be an investment contract.”

Ripple has filed its response to the SEC’s Opposition to Defendants’ Motion to compel the production of internal and inter-agency documents.

The SEC has been arguing privilege issues regarding its deliberative process on the nature of Bitcoin, Ether, and XRP should be enough to justify a refusal to hand over said documents, even though the Judge insists on doing go.

Ironically, it was found the same day that the Ripple counsel had confronted the SEC for deleting a portion of the William Hinman’s deposition transcript.

Both parties are scrambling to resolve the complicated privilege issues for the handover of the SEC’s documents and the hardships to deliver Ripple’s terabytes of Slack messages, which the defendant refuses to do. Everything must be straighten out before the end of August 31 (see lawsuit agenda).

SEC continues to fight what the Court already recognized is relevant to “fair notice” defense

As to the recently filed response by Ripple and its individual defendants, the letter summarized: “At issue here is the propriety of the SEC’s blanket invocation of the deliberative process privilege (“DPP”). Yet the SEC spends the bulk of its Opposition re
-litigating the relevance of materials that the Court has already found to be relevant and compelled to be produced.”

“The SEC also continues to fight the legal standards that the Court has already recognized apply to the “fair notice” defense raised by Ripple and to the SEC’s aiding and abetting claims against the Individual Defendants.

“What the SEC does not (because it cannot) defend is its across-the-board assertion of the DPP. Instead, the SEC asks the Court to trust it, order production of nothing, and look at nothing, notwithstanding the SEC’s admission – buried in a footnote – that it improperly designated forty documents as protected by the DPP when that privilege does not apply”, the defendants stated.

Not only the SEC’s argument that the documents are irrelevant ignores the court’s prior rulings, but the plaintiff ignores that the DPP is a qualified privilege and the SEC v. Ripple is an extraordinary case, according to the letter.

Enter William Hinman’s deposition

To prove its argument, Ripple cited the recent deposition of former Director William Hinman, which the SEC tries to pass it off as a non-event, “squandered” by Defendants, but the opposite is true, the letter said.

“Merely by way of example, Mr. Hinman admitted that prior to him joining the SEC in 2017 – but years into the alleged unregistered securities offering by Ripple – the application of the federal securities laws to digital assets was “new for everyone” and “no one knew a whole lot”

“He further admitted that he could not recall any specific work product generated at the time he joined the SEC relating to federal securities laws and bitcoin, ether or XRP and did not “think people had completely thought through all the ways . . . the securities laws may apply to
that activity”, Ripple’s letter reminded the court.

“This testimony, the documents produced – and potentially the documents that should be produced in discovery as a result of Defendants’
Motion – fatally undermine the SEC’s allegations that the Individual Defendants acted recklessly in failing to recognize Ripple’s sales of XRP as an unregistered securities offering as at that time, securities law experts of Mr. Hinman’s stature (to say nothing of the full Commission) had not reached that conclusion themselves, despite looking into the issue”, Ripple argued.

“Mr. Hinman’s personal views as to XRP’s status are dubious”

Ripple then doubled down on the issue pointing out several instances in which the SEC contradicted its former officials and vice-versa in public statements regarding the status of digital assets.

“Notably, Mr. Hinman’s testimony is refuted by the SEC’s own communications to the public, as late as October 2020, that the SEC had made no determination as to XRP’s status, and the SEC’s own filings in a case brought by XRP Holders now seeking to intervene in this case, which stated that XRP’s status under the securities laws is being litigated in this case”, the defedants’ counsel argued in the letter.

“Mr. Hinman’s personal views as to XRP’s status are dubious, in any event, given his testimony that not all of the factors laid out in Howey need to be met to be an investment contract.”

Fact discovery is coming to a close and breaking news are likely to increase in number. The most recent news relevant to the lawsuit can be found here.

SEC v. Ripple: CFTC Commissioner explains “Commodity or Security?” fallacy

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