SEC v. Ripple: SEC caught red-handed erasing important documents to win the case
The Securities and Exchange Commission (SEC) is accused of trying to influence the outcome of a lawsuit against Ripple Labs by erasing relevant documents.
- The William Hinman deposition transcript seems to indicate that the SEC tried to delete subtopics relevant to the Ripple lawsuit
- Ripple confronts SEC for deleting relevant information
The transcript is included in the most recent SEC motion regarding the privilege dispute between the agency and Ripple and individual defendants.
The SEC has filed an opposition to Ripple’s claim that the SEC improperly asserted privileges.
The agency responds to the client’s privilege dispute after an arduous back and forth.
This has led Ripple’s lead counsel Matthew Solomon sent a letter to Judge Sarah Netburn to request her help in the discovery dispute as fact discovery is coming to an end with many documents yet to be delivered ( lawsuit agenda).
In regard to the recently filed opposition to Ripple’s motion, the SEC argues the deliberative process privilege (DPP) is a critical governmental privilege “designed to promote the quality of agency decisions by preserving and encouraging candid discussion between officials.
“The Court should not override that privilege and punish frank governmental deliberations, particularly where the internal pre-decisional, deliberative material Defendants seek, which they never saw or knew about, is not relevant to any claim or defense”, they stated in the letter.
“Defendants have already sought and obtained an extraordinary amount of discovery from the SEC. Yet, Defendants now claim that privileged, non-public SEC communications about the regulation of digital assets (not just XRP), are somehow so relevant that the SEC’s important deliberative privilege should be overridden”.
“Meanwhile, Defendants have moved to strike on the record the most probative, relevant evidence they have obtained from their SEC discovery: former SEC Division of Corporation Finance Director William Hinman’s deposition testimony that he met with Ripple representatives and told them that he considered Ripple’s sales of XRP to be sales of securities and that Ripple should stop its unregistered sales”.
“The theory behind Defendants’ Motion appears to be that non-public and privileged comments by SEC employees that Defendants never saw, including about digital assets other than XRP, are relevant, but what Director Hinman told Ripple’s representatives about XRP is not”, the SEC added.
The abovementioned filed motion contains parts of the deposition of ex-SEC Director William Hinman, a much-discussed topic for its potential to change the course of the lawsuit.
Mr. Hinman gave the thumbs up to Ether as a non-security in 2018, resulting in market euphoria around the coin’s future potential. While it is still possible and entirely likely that an SEC complaint would trigger some form of regulation against Ethereum, many believe Mr. Hinman has made it clear that an Ethereum tokens are not securities.
Ripple confronts SEC for deleting relevant information
The William Hinman deposition transcript from December 2018 seems to indicate that the SEC tried to delete subtopics related to the Ripple lawsuit. On page 254, Ripple counsel Reid Figel claimed “it was deleted” and pointed the finger at SEC Special Counsel Michael Seaman.
“What’s the basis of that understanding, Reid?”, SEC lead counsel Jorge Tenreiro asked.
“Our review of the metadata. If you look to — depends on how you present it, but if you go to the second document, it says on some version of it deleted by Michael Seaman”, Mr. Reid replied.
Then, the SEC counsel suggested he asked William Hinman “if he directed Seaman to delete it. I mean, does he remember that”. The former SEC director answered the question with “I don’t recall directing him to do that.”
The deleted portion of the SEC document on page 96 was William Hinman’s answer to the question “Other than the issues with respect to Ripple, can you identify any other lawyers that came to you, not seeking a no-action letter, but seeking guidance with respect to transactions in digital assets?”
Mr. Hinman: “You call ten different law firms, they give you ten different answers, each of them has their own particular spin. It’s like the white light of your speech went through a prism and came out in ten different colors of legal advice.”
This case will remain ongoing until the SEC has determined that it no longer believes that the digital asset sold by Defendants is a security or the Court has otherwise ruled on the Defendant’s Motion to Dismiss.
While it can be said by many countries that Ripple’s XRP token is not a security, this case will likely have profound implications regarding the US government’s regulatory approach to tokens and coins issued going forward.