- The transcript of the motion to quash William Hinman’s deposition has been made public.
- The US Securities and Exchange Commission (SEC) vs. blockchain startup Ripple case is ongoing since Dec 2020.
- Lawyers from both parties presented their arguments to Magistrate Judge Sarah Netburn.
- Judge Netburn ruled to depose Mr. Hinman, but the details of his testimony are not yet public knowledge.
YEREVAN (CoinChapter.com) – James K. Filan, an attorney involved in the SEC vs. Ripple case, shared the transcript of the agency’s motion to quash the Hinman deposition, which ultimately failed, as Judge Sarah Netburn ruled against the motion in July 2021. However, the transcript revealed noteworthy arguments from both the prosecution and the defense.
Also read: XRP price drops 7% as SEC vs. Ripple case goes on with a 'Wall Street watchdog' on patrol.
Before referring to the telephonic hearing, it is essential to present the most crucial points in the said lawsuit, as they shed light on the importance of the transcript.
SEC vs. Ripple; essencial information
The law enforcement agency filed the infamous lawsuit in Dec 2020. The SEC accused Ripple, the current chief executive Brad Garlinghouse, and the former CEO Chris Larsen of fraud, citing their “unlawful” sale of $1.3 billion worth of XRP tokens as unregistered securities.
The fact that the agency didn’t extend the same ‘courtesy’ to larger cryptocurrencies like Bitcoin and Ethereum became the cornerstone of the lawsuit and one of the primary defense fronts. Furthermore, the defense cited what is now referred to as the “Hinman Speech” to prove their point.
In hindsight, William Hinman is the former Director of the Corporation Finance Division at the SEC. In his June 2018 speech, Mr. Hinman voiced his position on defining digital assets.
Putting aside the fundraising that accompanied the creation of Ether, 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.said the former official.
Ripple lawyers aimed to depose Mr. Hinman on the matter, i.e., order his testimony before the court. Undoubtedly, the further investigation of a former SEC official’s stance could clarify the case. However, the agency filed a motion to quash the deposition, citing the danger of creating a precedent questioning a high-ranking official.
The prosecution and the defense presented their arguments to Magistrate Judge Sarah Netburn in July 2021. As mentioned, the SEC argued that the serial abuse of litigation could destabilize government functioning. They cited the Judge’s own words prior to the hearing.
Subjecting former officials’ decision-making processes to judicial scrutiny and the possibility of continued participation in lawsuits years after leaving public office would serve as a significant deterrent to qualified candidates for public service.Judge Sarah Netburn had said before the hearing.
The SEC attorneys also pointed out they were not aware of any case where a current or former SEC director was forced to testify. Moreover, the defendants have not come forward with any such case. The prosecution added that ruling for Mr. Hinman’s deposition would mean “opening the floodgates to many many such subpoenas in this case and beyond.”
Judge Netburn noted that Mr. Hinman gave the speech on his behalf and specifically emphasized the views to be his own and not those of the SEC. However, the defense argued that the former official could shed light on the case, as he is well-versed on where digital assets fall in the law-enforcement field.
[Mr Hinman] does have the firsthand knowledge of industry perceptions of digital assets and of their regulatory status, because he knows firsthand about the communication he had with industry participants about whether digital assets were securities.
And he has that personal knowledge because he spoke to people outside the agency both before and after he gave the speech[…] in June 2018 about how the federal securities laws apply to digital assets.noted the defence.
The defense lawyers pointed out that third-party experts fall under a “non-privileged area of inquiry.” Thus, deposing Mr. Hinman could help voice not only his personal opinion but the ‘army of experts’ that he consulted. After showcasing the SEC’s “obvious inconsistency” regarding Ethereum definition, the Judge ruled against the motion.
I think that this case is not a basis for future cases and future judges to find that a deposition is appropriate in all instances. But I do think in this case Mr. Hinman, given the speech, must sit for a deposition. So I am going to authorize this deposition.Judge Netburn stated.
The issue of speech approval by the SEC and the subsequent impact for the case remains a question, as Mr. Hinman’s deposition transcript has not yet been revealed. However, the said impact could be substantial not only for SEC vs. Ripple but for other law-enforcement cases involving digital assets.