The court concluded the latest hearing on the SEC vs Ripple lawsuit yesterday. The conference call was focused on former SEC exec William (Bill) Hinman’s emails and the SEC’s legal attempt to halt their disclosure for Ripple, which might change the course of the lawsuit.
The legal community already called the hearings a “suicide mission for the SEC,” whose legal team has made major errors and increased the SEC’s chances of not winning the case.
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The attorney Jeremy Hogan participated in yesterday’s SEC vs Ripple hearings and has shared a summary of the key statements from the judge and two legal parties with the crypto community.
According to him, the SEC took a big step backward on a key issue and made a critical mistake that is going to come back to haunt them in the future.
The Battle on Definition
To begin with, the major part of the hearings were centered around the argument of the attorney-client privilege, which the SEC used to explain their refusal to grant Hinman’s speech documents to Ripple’s legal team.
The privilege covers communications between client and lawyer that are confidential and constitute legal advice. Such status allows keeping Hinman’s emails and any other communication with lawyers inaccessible to the court.
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This is why the question of who is the client became of key importance for both legal teams: was it Bill Hinman as a person or Bill Hinman as an active Director of SEC’s Corporate Finance Division at the time of the speech?
If it turns out that the SEC lawyers were counseling Hinman as a representative of the SEC, the agency would no longer have the right to use attorney-client privilege and would have to disclose speech-related documents for Ripple’s lawyers.
If it turned out that the SEC lawyers were counseling Bill Hinman as a person, there would be no legal basis for SEC lawyers to legally advise him, leading to the new arguments against SEC’s attorney-client privilege.
Inconsistent Position of SEC
The court has also earlier established the hard position that Bill Hinman’s speech at the 2018 conference was his personal opinion. “The SEC has in the past distanced themselves from Hinman as his speech was his personal opinion,” the judge reminded.
In the meantime, the SEC’s lawyer continued to argue about whose opinion the speech was. “This speech was given by Hinman as his official position as director,” the lawyer first claimed, later adding that “Hinman gave his disclaimer that the speech was his personal opinion.”
The SEC’s inconsistency of what position it is going to take became an issue for the judge who asked SEC’s legal team to specify in regards to “what is personal and what is official.”
The SEC’s lawyer seemed to struggle with finding the answer, and tried to explain the speech as “based on Hinman’s view that is his Corp Fin’s [SEC’s Corporate Finance Division Director’s] view.” However, she later changed her opinion, stating that “he was speaking as Corp Fin in the speech.”
The Critical Mistake: Win a Loser, Lose a Winner?
The legal community called the SEC attorney’s decision to change arguments on Hinman’s speech a critical mistake. “The SEC attorney was trying really hard today and arguing various positions in order to try to win this motion, which is probably not really possible to even win,” said attorney Jeremy Hogan, who was closely following the hearing.
“However, while trying to win a loser, SEC might just have lost a winner,” he added, hinting to the SEC attorney’s potentially fatal remark at the end of the hearing.
According to his notes, the SEC lawyer stated that “the purpose of the [Hinman’s] speech was to provide market guidance on how the SEC would treat digital assets.”
This is what brings Hinman’s speech back into play potentially as official guidance as to whether XRP is a security, Hogan said.
Back in 2018, Hinman publicly admitted that offers and sales of Ether are not securities transactions, triggering the ETH price rally and strengthening the industry’s view that digital currencies are not securities.
