The United States Securities and Exchange Commission (SEC) has suffered a blow in its case against Ripple after a US judge denied its claims of attorney-client privilege in relation to internal documents related to the “Hinman speech”.
By denying the motion on Tuesday, Trial Judge Sarah Netburn pointed to the SEC’s hypocrisy in arguing that the speech—in which former official Bill Hinman suggested that Ether (ETH) was not a security—was Hinman’s personal business while asserting that he was to be protected because he received legal advice from the SEC to confirm the commission’s policies:
“The hypocrisy of arguing to the Court, on the one hand, that the Speech is not relevant to the market’s understanding of how or if the SEC will regulate cryptocurrency, and on the other hand, that Hinman sought and obtained legal advice from attorneys for the SEC in the wording of its Speech, suggests that the SEC is adopting its litigation positions to further its desired objective, and not out of faithful allegiance to the law.”
Hinman’s draft speech, which the SEC has fought to keep secret, has been seen by many in the Ripple (XRP) community as a critical piece of evidence that could work in favor of Ripple Labs.
The SEC sued blockchain firm Ripple in late 2020 over allegations that top executives Brad Garlinghouse and Christian Larsen sold Ripple’s XRP tokens as unregistered securities.
However, Ripple has argued that former Director of the Division of Corporate Finance Bill Hinman’s speech in 2018 stated that Ether did not constitute “securities transactions”, contradicting the SEC’s stance on the matter.
This was not even a nuanced opinion. Judge Netburn tore apart every SEC argument for attorney-client privilege of the Hinman emails.
That starts the 14 day clock for an appeal to Judge Torres. And if her recent Orders from her are any precedent, things will move relatively fast. https://t.co/7k6KJx4Lea
— Jeremy Hogan (@attorneyjeremy1) July 12, 2022
This was not even a biased opinion. Judge Netburn tore apart all of the SEC’s arguments about the attorney-client privilege of the Hinman emails.
This starts the 14-day clock for the appeal before Judge Torres. And if his recent orders are anything to go by, things will move relatively quickly.
Barring new appeals or delays, the sentence establishes that: “The documents must be presented.”
Delphi Digital General Counsel Gabriel Shapiro called it a “huge tactical win for Ripple” in a Tuesday tweet.
wow. big tactical win for Ripple. https://t.co/oS4HRO1u2x
— _gabrielShapir0 (@lex_node) July 13, 2022
Some believe an appeal by the SEC is likely. Founder of crypto-legal news outlet Crypto-Law, John E Deaton, told its 205,000 followers on Tuesday that the appeal, along with Ripple’s objection, would come within 30 days. He, too, believes the appeals judge will side with Judge Netburn’s recent ruling.
If there are no extensions granted, Judge Torres will have the SEC’s appeal and Ripple’s objection to the appeal in 30
Days. After Judge Torres upholds Judge Netburn’s decision, the SEC can ask Judge Torres to certify an appeal to the 2nd Circuit. She is likely to deny doing so. https://t.co/HtMjbjk2OK— John E Deaton (205K Followers Beware Imposters) (@JohnEDeaton1) July 13, 2022
If no extensions are granted, Judge Torres will have the SEC appeal and Ripple’s objection to the appeal in 30 days. After Judge Torres upholds Judge Netburn’s decision, the SEC may ask Judge Torres to certify an appeal to the 2nd Circuit. It is likely that he will refuse to do so.
The SEC continues to insist that Hinman’s speech was a “purely personal message” that was not intended to offer legal advice.
Judge Netburn acknowledged that this could potentially protect the drafts if Hinman were a private citizen.. However, Judge Netburn wrote that the commission also argued that Hinman would not have had access to the information and resources if he were not already working at the SEC:
“It was only in the context of his employment that he was able to request the edits and comments that he made.”
If the content of the speech documents is convincing enough, it could be a turning point for Ripple in the case, which has been seen as potentially setting a precedent for other issuers of similar cryptocurrency tokens.
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