Prices of XRP, which powers some of Ripple Labs payment and exchange network services, dipped 1.3% in the 24 hours to 10:15 a.m. in Hong Kong. The token reversed gains that followed the release of internal Securities and Exchange Commission (SEC) documents on Tuesday that Ripple had claimed could prove the regulator had unfairly targeted the company with a lawsuit. XRP is down 2.05% over the past seven days.
In December 2020, the SEC filed a lawsuit against Ripple alleging that its sale of XRP was an unregistered securities offering. The SEC also named Ripple’s executive chairman Chris Larsen and chief executive officer Brad Garlinghouse as co-defendants for allegedly aiding and abetting Ripple’s violations.
As part of the lawsuit, hundreds of documents were released Tuesday related to a speech given by an SEC former director William Hinman on whether cryptocurrencies are securities.
The SEC had sought to keep the documents sealed, but Judge Analisa Torres of the U.S. District Court for the Southern District of New York ruled in May the documents should be made public, in what was seen as a favorable ruling for Ripple.
In June 2018, Hinman said in a speech that sales of the Ether cryptocurrency were not securities transactions, and “as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.” The speech has become a major point of argument in the case as Ripple seeks to bolster its fair notice defense.
The released documents include email exchanges between Hinman and a number of SEC staffers in preparation for his 2018 speech.
One email shows that an SEC employee commented on the speech draft: “Although we do not want to suggest that BTC is a security, taking too strong a position on the lack of any benefits from the disclosure provisions of the federal securities laws … might be a wedge that could undermine SEC efforts towards other crypto-assets where the asset is a security.”
Ripple’s chief legal officer Stuart Alderoty is calling for investigations into Hinman.
“An investigation must be conducted to understand what or who influenced Hinman,” Alderoty tweeted on Tuesday.
The documents show: “Hinman ignored multiple warnings that his speech contained made-up analysis with no basis in law” and showed the SEC flip-flopped and overstepped the boundaries of its jurisdiction, according to Alderoty.
“Unelected bureaucrats must faithfully apply the law within the constraints of their jurisdiction. They can’t – as Hinman tried – create new law,” Alderoty said.
Brad Garlinghouse, chief executive officer of Ripple Labs, tweeted Tuesday that it’s “absolutely unconscionable” that a regulator decided to move forward with the speech despite internal pushback.
The SEC has “essentially weaponized” the lack of regulatory clarity through enforcement actions since this speech was given, Garlinghouse added.