On Friday, Ripple (XRP) rallied as the crypto market stabilized after Terra’s depegging sent shockwaves throughout the industry.
Ripple ended Thursday at $0.377384, rallying to $0.439217 by the end of Friday, data from Coingecko shows, as the debacle surrounding former SEC Corporation Finance Director William Hinman’s comments escalates legal proceedings toward an impending court date.
Tether, which depegged to $0.9508 on Thursday as data from CoinMarketCap shows, recovered Friday to $0.99 levels, as stablecoins faced an exacting week following the collapse of Terra’s stablecoin.
Judge grants SEC’s Motion to file a Reply Brief on Hinman documents
On Wednesday, the SEC added a small victory to its plate in the ongoing case against Ripple Lab, whereby a judge granted the SEC’s request to file a reply brief in connection with the SEC’s attorney-client privilege claims regarding the 2018 communications made by former Corporation Finance Director William Hinman, who indicated that Ethereum was not a security.
Uncovered emails revealed that Hinman knowingly had a conflict of interest in making the speech before delivering it.
“Based on my understanding of the present state of ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions,” Hinman stated back in 2018.
In his speech, he opined that Ether is not a security, stating that ‘based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions.’ Ether’s value rose immediately after Mr. Hinman’s speech,” said anti-corruption watchdog Empower Oversight.
Does the SEC’s arguments have any leg to stand on?
However, Hinman argues four reasons against the SEC’s rationale, claiming that the 2018 communications cannot be protected under attorney-client privilege.
While Hinman could engage with an attorney for official duties, shielding any correspondence through attorney-client privilege, any consultation undertaken in his personal capacity would not fall under that same scope.
Additionally, Hinman’s communication would not contain confidential agency information. Lastly, if the SEC should find any information that could be protected, the only party who could claim attorney-client privilege is Hinman.
The SEC must respond to Filan’s arguments by May 18.
Is XRP a “security?”
Since the SEC sued Ripple and its executives at the twilight of the Trump administration, there has been a legal tussle to resolve the dispute out of court.
The SEC’s primary argument in the ongoing lawsuit centers around the allegation of Ripple, by and through its XRP token, violating the Securities Act of 1933. Ripple’s defense is that XRP serves purposes that invalidate its classification as a security. The filing cites the token’s function as a medium of exchange, and therefore, the SEC has no authority to regulate it.
Ripple has argued that its currency is used as an intermediary for remittance payments and is not a security. After that, Ripple’s defense requested internal SEC communications concerning a potential uncertainty on which assets the SEC can oversee, which a judge granted on a limited basis.
Ripple then argued that the SEC had not timeously clarified which assets fell under its jurisdiction, giving the company no warning about how existing laws apply to its product. The SEC countered by saying that Ripple obtained legal advice in 2012 identifying XRP as an investment vehicle requiring SEC oversight
Up and until Hinman’s 2018 statements, the the SEC had been investigating whether Ethereum’s close ties to its founders rendered it centralized, making it a security. Hinman’s speech implied that if ether was primarily bought to allow participation in a decentralized network rather than glean trading gains on exchanges, it could not be considered a security.
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