The eagerly awaited “Hinman documents” in the legal battle between Ripple Labs and the US Securities and Exchange Commission (SEC) have been published today! After the XRP price initially reacted moderately, the altcoin experienced a rise of about 6% at the time of writing.
Just yesterday, Ripple CEO Brad Garlinghouse said that the Hinman docs will be worth the wait. He was alluding to their potential importance of the documents for the ongoing legal battle. And XRP investors seem to agree with him, although not all community members are euphoric.
Ripple Vs. SEC: This Is What The Hinman Docs Reveal
Bill Morgan, a popular lawyer in the XRP community, declared that Stuart Alderoty (Ripple’s Chief Legal Officer, CLO) and Brad Garlinghouse “were not exaggerating”. According to him, “#Ethgate is alive and kicking after all.”
The documents reveal that Bill Hinman, the former director of the Division of Corporation Finance at the SEC, involved Ethereum founder Vitalik Buterin before his notorious speech in which he classified ETH as a non-security.
In the run-up to his speech, Hinman called Buterin to confirm how Ethereum operates. The SEC’s internal documents also reveal that on May 31, 2018, opposition grew within the SEC to the recommendation to classify Ether with Bitcoin as a non-security.
On June 4, Hinman shared a draft of his speech with the commission’s division directors. The document reveals that Hinman was planning his call with Buterin later that week.
Nevertheless, the SEC’s Office of General Counsel (OGC) suggested deleting the mention of ETH in the draft. The OGC was concerned about the difficulties it would face if it took a different position on Ether in the future. As is well known, Hinman disobeyed this directive and made ETH a focal point of his speech.
This is one reason why respected XRP community member Mr Huber is rather disappointed. According to him, the emails are a “nothing burger.” They only prove that Hinman was persistently warned to avoid any references to Ethereum to avoid market confusion.
“Despite these warnings, Hinman not only neglected this advice and even doubled down, focusing his entire speech on giving ETH a regulatory monopoly. Such a clumsy director,” writes Mr Huber, who is one of Bill Hinman’s biggest critics and accuses him of conflicts of interest.
But lawyer Bill Morgan also sees arguments that help Ripple in its defense against the SEC. For example, the lawyer discovered several passages in the Rule 56.1 statement that speak particularly in favor of Ripple’s fair notice defense.
Several SEC communications indicate that SEC officials were well aware that the speech would lead to “greater confusion” and that they intentionally wanted to give industry participants “fewer details,” presumably to give the agency more leeway.
In addition, the documents show that the regulator revised its own internal views on factors that the SEC staff had previously deemed “not relevant” or that even proved that an asset was not a security. Words that were not previously relevant were redacted, Morgan says.
For example, in 2018, the SEC held that lockups were not relevant and were indicative of a non-security. After that, the agency changed its opinion.
At press time, investors seemed to view the publications as positive for XRP. The price rose by 8% to $0.5609 since the Hinman docs were published.
Featured image from Ryan, Swanson & Cleveland, PLLC, chart from TradingView.com