Mr. Hinman was the one that ruled that Bitcoin and Ethereum are not securities, despite the latter debuting in an initial coin offering (ICO) in 2014.
The Securities and Exchange Commission has filed today a motion to quash Ripple’s deposition subpoena directed to William H. Hinman, former Director of the SEC’s Division of Corporate Finance.
The SEC argues that the defendants bear the burden of showing “exceptional circumstances” justifying the deposition and stated that Ripple Labs and its co-founders “cannot meet this high burden.”
According to the motion, the defendants want Mr. Hinman’s testimony on the SEC’s internal views and policy decision-making.
To argue against the deposition, the regulator stated that Mr. Himan was of critical importance to the SEC’s operations, has no first-hand knowledge of the facts underlying this action, and defendants cannot meet the burden of “exceptional circumstances.
Who is William H. Hinman?
Calling the former SEC Director of Corporate Finance to the stand may be part of Ripple’s move to turn the lawsuit against the Securities and Exchange Commission.
Mr. Hinman was the one that ruled that Bitcoin and Ethereum are not securities, despite the latter debuting in an initial coin offering (ICO) in 2014. With XRP they said its status had “not been determined.”
When Ripple requested the internal documentation to explain how and why the SEC made its decisions, the regulator said that nothing Clayton and Hinman (as well as any SEC official) said about bitcoin or ether was an “official determination” on whether they are securities.
Now there might be a conflict of interest in play as Hinman left the SEC and returned to Simpson Thatcher, which paid him a $1.6 million annual pension. The law firm is connected to the Ethereum Enterprise Alliance.
It appears that XRP doesn’t have to be a security to get sued by the SEC
SEC Commissioner Hester Peirce, also known as “crypto mom”, has recently stated that the SEC should focus more on regulatory clarity and less on enforcement at the present time.
Ms. Peirce told Bloomberg TV what is the SEC’s intention when filing a complaint against a firm for an unregistered securities offering.
“When we think about a cryptoasset as being a security what we’re doing is we’re saying it’s being sold as part of an investment contract. It doesn’t mean that the asset itself necessarily has to be a security. It means that it was being sold as a security.”
This could relate to XRP as well, although she is not commenting on ongoing SEC litigation.
The SEC complaint, filed on 22 December 2020, doesn’t seem to mention that broader view. This is how the first paragraph goes:
“The Securities and Exchange Commission announced today that it has filed an action against Ripple Labs Inc. and two of its executives, who are also significant security holders, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.”
Throughout the lawsuit, the regulator has claimed that Ripple’s XRP is a security due to its centralized nature and so, it falls under its regulatory scope.
Ripple says it never held an ICO nor its digital asset can be defined as a security since its utility is proven every day across the globe as it is used for cross-border payments.
