SEC allegations dismissed
Regarding the crypto asset XRP, it was revealed on the 16th that some of Ripple’s claims were accepted while the U.S. Ripple and the U.S. Securities and Exchange Commission (SEC) were in court.
U.S. District Judge Annalisa Torres has denied the SEC’s motion to sequester documents related to a speech by former corporate finance director William Hinman. The document could be important evidence for Ripple in the SEC’s securities lawsuit.
Following the ruling, the price of XRP increased by 8% from the previous day and is currently trading at 62.23 yen (according to CoinMarketCap). Ripple CEO Brad Garlinghouse called the ruling “another victory for transparency.” He also said a mechanism for lawyers to release the documents is under consideration.
Another win for transparency! Unredacted Hinman emails to be publicly available soon – stay tuned as the lawyers work through the mechanics to make that happen. https://t.co/o6puPypRHd https://t.co/qmaLVeQaP8
—Brad Garlinghouse (@bgarlinghouse) May 16, 2023
This time, Judge Analisa Torres denied the SEC’s motion to seal the documents, ruling that the documents are subject to public disclosure. Editing to protect certain information, including removing personal and financial information, is permitted.
Judge Torres also dismissed Ripple’s attempt to remove or amend information about revenue from XRP sales and compensation to trading platforms as “overly scoped.”
Mr. Hinman’s lecture document
In December 2020, Ripple, its CEO Garlinghouse and co-founder Chris Larsen were sued by the SEC for selling XRP as an unregistered security. The SEC alleges that Ripple sold unregistered securities.
The case has a key focus on former SEC Commissioner Hinman’s 2018 speech. In that speech, Hinman said that he does not consider the cryptocurrency Ethereum a security. Ripple argued that the speech reflected the SEC’s stance and should be made public, and requested emails and documents related to the speech.
However, the SEC countered that the documents should have legal protection. In April 2022, Judge Sarah Netburn ruled that the speech should not be protected by legal prerogative.
The SEC has since challenged this, and the dispute is still ongoing in the Court of Appeals. In this ruling, Judge Torres again rejected the SEC’s arguments and ordered the release of the documents.
The SEC retains the right to appeal to the Supreme Court. However, in order for the Supreme Court to accept an appeal, certain criteria must be met, and it is generally believed that only important cases are considered.
connection:Ripple Trial Rejects SEC’s Petition to Hide Hinman’s Ethereum Remarks
Regarding the status of the trial over the securities nature of XRP, in September 2010, the SEC and Ripple each filed a motion for “summary judgment” in the New York federal district court. This is a procedure in which the court skips the normal fact-finding process and makes a decision based on the arguments set forth in the documents submitted.
In March 2023, CEO Brad Garlinghouse said he expected a decision to be made in 2023.
A key focus of the litigation concerns the authorization of the “Fair Notice Defense.” This, Ripple claims, was not properly warned by the SEC. Ripple attorney Michael K. Kellogg alleges in April that Ripple provided evidence to the SEC that it did not consider XRP to be an “investment contract.”
Kellogg also points out that the SEC has caused regulatory confusion by providing unclear guidance that differs from the Howie test. The SEC sued Ripple despite knowing the information, and Ripple criticizes the SEC’s actions and claims the application of the fair notice defense.
What is Howie Test
The Howie Test is a test that determines whether a particular transaction falls under one of the definitions of securities transactions called “investment contracts” in the United States. It comes from the SEC’s lawsuit against WJ Howey. Although this itself is not legally binding, the SEC has taken legal action against multiple ICOs (token sales) based on this test.