XRP spiked to $0.5668, marking a 10-week high, as documents related to former Securities Exchange Commission (SEC) Director William Hinman were made public.
The SEC filed against Ripple in December 2020, alleging the company and two senior executives had raised $1.3 billion through the sale of XRP tokens – which the agency deems unregistered securities.
A key component of Ripple’s defense is determining the SEC’s securities classification process and discovering why XRP was singled out while ETH and BTC were not—establishing this required releasing internal SEC documents, including records related to the infamous “Hinman speech,” which effectively greenlit the two biggest cryptocurrencies.
The Hinman issue
Last month, the SEC’s motion to seal the internal documents related to the Hinman speech was denied by Judge Torres.
She ruled that the documents were not protected by deliberative process privilege – which can grant executive U.S. government branches disclosure exemptions in civil litigation cases.
The former SEC Director spoke at Yahoo Finance All Markets Summit: Crypto in 2018, stating a cryptocurrency might no longer be classed as a security if its 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 to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract.”
During the ongoing lawsuit, it was established that the comments made in the speech were Hinman’s personal views and should not have been interpreted as SEC policy.
On June 13, internal SEC documents related to the Hinman speech were released to the public – representing a further blow to the SEC.
Ripple’s Chief Legal Officer, Stuart Alderoty, commented on the documents pointing out several instances of ignoring feedback from the agency’s Head of Trading and Office of General Counsel.
These included over-complicating the Howey test, straying too far from the Howey standards, and the “regulatory gap” related to investors of cryptocurrencies with “sufficiently decentralized networks” still benefiting from registering with the agency, a remark overlooked by the former SEC Director.
Furthermore, an email from Hinman dated June 4, 2018, stated 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 operates.”
Alderoty called for an investigation into “what or who influenced Hinman” and why feedback on the speech was ignored. He also inferred Hinman had overstepped his remit by creating law without the authority.
“Unelected bureaucrats must faithfully apply the law within the constraints of their jurisdiction. They can’t – as Hinman tried – create new law.“
XRP had given up most of today’s gains, sinking to $0.5274 at the time of press.