The Commission’s Desperate Attempt to hide the Corruption at the SEC
Ripple’s recent efforts to uncover the SEC’s internal communications reflect a growing frustration with the lack of clarity and consistency when it comes to cryptocurrency regulations in the U.S.
Ripple Labs Inc, the company behind the embattled XRP cryptocurrency, is in the news again following the discovery of some extraordinary emails related to an ongoing battle with the SEC (Securities and Exchange Commission).
The SEC has been trying to avoid submitting emails sent by William Hinman – former Director of the Division of Corporation Finance at the SEC – to the court as they relate to a comment he made during a speech in 2018 about whether or not XRP is a security.
James K. Filan, a lawyer who has been involved actively in the Ripple vs. SEC lawsuit, tweeted that the Commission filed a letter motion on April 29, requesting to keep all emails and drafts related to Hinman’s speech on the SEC’s privilege log, private from Ripple and the court, citing the attorney-client privilege.
It’s worth noting that Hinman is accused of improprieties and conflict of interest by the Commission’s ethics office. The allegations against the Silicon Valley deals lawyer stem from his involvement with a company called Simpson Thacher & Bartlett, a New York-based law firm that sits on the Enterprise Ethereum Alliance, representing Ether’s (ETH) related financial interests. Hinman held a major post at Simpson Thacher & Bartlett prior to being appointed to the SEC.
Emails obtained by Empower Oversight, a non-profit organization, show Hinman violating the agency’s rules on multiple occasions. In one correspondence with Shira Minton, a former SEC’s Ethics counsel, Hinman was specifically warned to avoid meeting with Simpson Thacher & Bartlett while he was still working as a SEC director.
“You have a bar under the criminal financial conflict with Simpson because you have an ongoing financial interest in the firm. meeting with them while having such a conflict is not permitted,” Minton’s email read.
However, following the warning, Hinman proceeded to meet on four different occasions with Josh Bonnie, a Simpson Thacher & Bartlett associate. The former SEC director also spoke with Ethereum investors ahead of his June 2018 speech in which he deemed crypto-asset ETH to be a non-security.
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The SEC’s April 29, 2022 letter motion filing is basically a permission request to protect certain comments in director Hinman’s speech draft. In their filing, SEC lawyers have asserted their right to attorney-client privilege, arguing that their consultation with Hinman on laws related to securities makes him their customer in this case.
The Commission’s request is not surprising, given the significance of Hinman’s comments regarding cryptocurrency. On June 14, 2018, Hinman issued a statement in which he declared that digital currencies like Ethereum and Bitcoin (BTC) are not considered securities under existing US law. Many think XRP was also included in the conversation, which could see the charges against Ripple go away.
Despite the statement’s crucial importance, SEC’s decision to protect Hinman’s speech could have further implications for both the crypto community and SEC itself. By shielding certain portions of Hinman’s statement from public scrutiny, SEC may be trying to prevent other regulators or entities from challenging or building on its findings.
Whether this move will benefit the crypto community, in the long run, remains to be seen, but one thing is clear: the future of cryptocurrency regulation is sure to be an ongoing topic of debate.