In its first leg of victory against the Securities and Exchange Commission (SEC), Ripple Labs has handed over crucial documents that will aid in its conflict against the watchdog, which asserts that the company's XRP/USD tokens were sold illegally as an unregistered security.
What Happened: The documents were obtained after 18 months and six court requests.
The so-called Hinman documents consist of internal SEC drafts and emails pertaining to remarks made by William Hinman who previously served as director of the SEC's Division of Corporation Finance. He declared that the watchdog did not view Ether ETH/USD as security.
According to Ripple, if Ether was not regarded as security at the time, then why should XRP, which is arguably more like a currency, be subject to U.S. securities law?
The SEC made at least three attempts to suppress the records, but the Southern District Court of New York's Magistrate Judge Sarah Netburn overturned the SEC's position twice, first in February and second in April.
Late last month, Judge Analisa Torres rejected the SEC's requests to suppress the materials for the third time.
Why It Matters: The announcement caused the price of XRP to increase by more than 9%. The XRP token is currently trading at $0.44, down 3% compared to the previous day, according to data from Benzinga Pro.
“Over 18 months and 6 court orders later, we finally have the Hinman docs (internal SEC emails and drafts of his infamous 2018 speech). While they remain confidential for now (at the SEC’s insistence), I can say that it was well worth the fight to get them,” Alderoty stated.
“I’ve always felt good about our legal arguments, and I feel even better now. I always felt bad about the SEC’s tactics, and I feel even worse about them now,” he added.
What's Next: The lawsuit is still pending. The result of the legal jousting between the two parties may also have industry-wide repercussions since it could set a precedent for how cryptocurrency is governed and considered as either a security or a commodity.
Also, the SEC maintains that two Ripple executives, former and current CEOs Brad Garlinghouse and Chris Larsen, broke securities laws in 2013 when they attempted to raise money without first registering with the agency.
The SEC filed an action against the company in 2020.
Ripple generated more than $1.3 billion in an XRP token sale more than nine years ago, the regulator claims. Ripple denied the claims.
In a court filing submitted in 2020, Ripple stated, “Ripple denies it engaged in any offering of securities; denies the inaccurate characterization of the legal advice Ripple received regarding XRP; and denies that it engaged in a single ‘offering’ of XRP.”
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