XRP spiked to $0.5668, a 10-week high, as documents related to former Securities Exchange Commission (SEC) director William Hinman were made public.
The SEC filed a complaint against Ripple in December 2020, alleging that the company and two senior executives raised $1.3 billion through the sale of XRP tokens — which the agency considers unregistered securities.
An important part of Ripple’s defense is determining the SEC’s securities classification process and discovering why XRP was singled out and ETH and BTC were not. Establishing this required internal SEC documents to be released, including records pertaining to the infamous “Hinman speech,” which identified the two largest cryptocurrencies.
The Hinman case
Last month, the SEC’s request to seal internal documents related to the Hinman speech was denied by Judge Torres.
She ruled that the documents were not protected by the deliberative process privilege — which can grant executive U.S. government departments waivers for disclosure in civil litigation.
Speaking at Yahoo Finance All Markets Summit: Crypto in 2018, the former SEC director stated that a cryptocurrency may no longer be classified as a security if the network becomes sufficiently decentralized. He gave BTC and ETH as examples of digital assets that meet these criteria.
“If the network on which the token or coin is intended to operate is sufficiently decentralized – where buyers would no longer reasonably expect an individual or group to undertake essential managerial or entrepreneurial endeavors – the assets may not represent an investment contract.”
During the ongoing litigation, it was determined that the comments were in Hinman’s speech personal views and should not have been interpreted as SEC policy.
Documents released
On June 13, internal SEC documents related to the Hinman speech were released to the public – another blow to the SEC.
Ripple’s Chief Legal Officer, Stuart Alderotycommented on the documents and pointed out several instances of ignoring feedback from the Head of Trading and Office of General Counsel.
This one included overcomplicating the Howey test, straying too far from Howey standards and the “regulatory gap” regarding investors of cryptocurrencies with “adequately decentralized networks” who still benefit from registering with the agency, a comment made by the former SEC director was overlooked.
Further one email of Hinman dated June 4, 2018, stated that he sees no need to regulate ETH as a security. It also mentioned a phone call with Ethereum co-founder Vitalik Buterin, “to confirm our understanding of how the Ethereum Foundation works.”
Alderoty called for an investigation into “what or who influenced Hinmanand why feedback on the speech was ignored. He also concluded that Hinman had overstepped his mandate by making laws without the authority.
“Unelected bureaucrats must faithfully apply the law within the limits of their jurisdiction. They cannot – as Hinman tried – make a new law.“
XRP had given up most of today’s gains, falling to $0.5274 at the time of going to press.
