- Recent updates on the lawsuit between U.S. Securities and Exchange Commission and Ripple Labs.
- The SEC filed a motion to quash Ripple’s deposition subpoena to former director William H. Hinman.
- SEC argues that Ripple needs to prove there are “exceptional circumstances” justifying the deposition.
Ripple Labs subpoenaed former Director of SEC’s Division of Corporation Finance, William H. Hinman, for a deposition. However, on June 24, SEC filed a motion against the subpoena, arguing that Ripple Labs cannot ‘meet the burden’ of showing ‘exceptional circumstances’ that justify the deposition.
What The SEC Said
In its motion, the regulator requested the court to overrule the subpoena until after SEC’s motion to strike Ripple’s fair notice defense reached a verdict. To argue against the deposition, the SEC stated that Director Hinman is a former high-ranking government official and held a position of critical importance at the SEC. As such, Ripple’s approach will disrupt the functioning of government agencies as it would discourage qualified people from public service.
Additionally, the SEC pointed out that the former director derived any information about the case from review meetings with SEC’s Division of Enforcement, submissions by Ripple’s counsel, and conversations with SEC staff. As such, Mr. Hinman has no “personal first-hand knowledge” of the facts underlying the ongoing legal battle.
Finally, to depose a high-ranking government official, current or former, Ripple will need to prove the existence of exceptional circumstances.
For the uninitiated, ‘exceptional circumstances’ refer to a situation in which “the official’s testimony will likely lead to the discovery of admissible evidence essential to that party’s case.” The purpose of the rule is to protect the mental processes of government officials. The regulator pointed out Ripple cannot ‘meet the burden.’ Thus, the court should quash the subpoena.
Who Is Former Director William H. Hinman
Mr. William H. Hinman is SEC’s former Director of Corporate Finance. Calling him to the stand may be Ripple’s move to turn the tables against the SEC.
Interestingly, Mr. Hinman had made a speech in which he said that Bitcoin and Ethereum are not securities. However, the market regulator sidestepped this mine by saying that the speech was the director’s own views and not an “official determination.”
Ironically, there may be a conflict of interest in play. Mr. Hinman joined Simpson Thatcher, a law firm connected to the Ethereum Enterprise Alliance, after SEC. Also interesting is the fact that the law firm paid him an annual pension of $1.6 million.
Ripple v/s SEC: Other Case Developments
Earlier this month, Ripple laid down the argument that SEC did not give it fair notice before the lawsuit. Although the SEC cited a report by Cornerstone Research to support its claim of giving a fair notice, Ripple’s defense argued that the document did not apply to Ripple’s situation.
The court also ordered SEC to share policies governing the trade of digital assets by SEC employees, which was a win for Ripple’s legal team.
The payment settlement network also had another small victory as the court denied SEC’s motion to access all of Ripple’s documents about legal advice related to XRP sales.
Recently, in an interview, SEC Commissioner Hester Peirce said that XRP ‘doesn’t necessarily have to be a security.’ As a matter of fact, in her view, being a part of an investment contract makes it a security.
At the time of writing, XRP, Ripple’s native token, was trading at $0.632, down by 6.07% since morning.