In the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Ripple (XRP), the company’s general counsel has publicly picked apart the juicy “Hinman speech” evidence. It’s also about possible bribery.
For a year and a half now, the mammoth trial between the U.S. Securities and Exchange Commission and Ripple over XRP has dragged on. A ruling on whether Ripple (XRP) falls under the SEC’s regulatory powers is not expected until 2023. In the meantime, Stu Alderoty, Ripple’s general counsel, is now speaking out. In an opinion piece for the US magazine Fortune, the lawyer focuses on the so-called “Hinman speech” from 2018, which plays a central role in the proceedings with the SEC.
William Hinman spoke as a then board member of the SEC on the topic of cryptocurrencies and related regulatory challenges. In his speech, documented here, Hinman surprised the audience by not classifying Ethereum (ETH) as “securities,” which was taken as regulatory carte blanche. Ripple wants to achieve similar for XRP. The Hinman speech itself and preparatory internal communications in the SEC have already caused sharp controversy at the current trial in New York. The SEC wanted to keep as much under wraps as possible and even argued that Hinman had taken private positions. Ripple attorney Stu Alderoty alludes to this backstory in his commentary titled “The speech that muddied the crypto waters.”
That’s because in 2018, the crypto industry had interpreted Hinman’s speech as a breakthrough. Decentralized cryptocurrencies like Ethereum did not seem to be bothered further by the SEC. Ripple had peaceful and confidential discussions with the SEC because of XRP also due to the “Hinman speech”, Stu Alderoty said. All the more they were irritated by the SEC’s indictment in December 2020, he says. Alderoty follows up: As it has only now emerged, Hinman was probably (indirectly) the recipient of millions of euros in funds from the Enterprise Ethereum Alliance, a kind of lobbying company for ETH. This came out through persistent use of a US information privilege and is summarized here.
Thus, Stu Alderoty understandably wonders why the SEC did not investigate and disclose Hinman’s possible conflicts of interest with respect to Ethereum. In general, it is questionable why the SEC tried to maneuver cryptocurrencies like XRP into the vicinity of securities and thus into regulation with an outdated Howey test, Alderoty continues. His conclusion: the U.S. needs clear guidelines for the crypto industry, but the SEC is preventing this and is instead getting bogged down in the case of XRP and Ripple.
Bottom line: Ripple feels strongly about its case against the SEC
It is the “Hinman speech” with its attendant circumstances that has provided stage victories in court for Ripple since spring. The SEC is positioning itself here to its former top official with constantly changing arguments, without being able to convince the court. Group counsel Alderoty paints a picture of the “Hinman speech” that suggests an SEC from which the crypto industry should not expect consistent and transparent answers. At least morally and ethically, Alderoty thus manages to win a point for Ripple and XRP. From a purely legal perspective, however, the process with the SEC continues to hang in the balance, blocking a future for XRP.