Bulletins

A judge slammed the SEC for its 'hypocrisy' in Ripple case

The agency has now been ordered to release crucial documents related to the question of whether cryptocurrencies are securities.

Symbolic XRP coin

A federal judge accused the SEC of "hypocrisy" in refusing to release documents in the Ripple case.

Photo: Kanchanara/Unsplash

A federal judge has ordered the SEC to release documents in its court battle with Ripple, blasting the agency's repeated refusal to do so as “hypocrisy.” It's an apparent win for Ripple in the ongoing fight over whether the XRP cryptocurrency it uses for payments is a security.


U.S. Magistrate Judge Sarah Netburn ordered the SEC to produce internal documents related to former director William Hinman’s 2018 speech, in which he argued that ether was not a security.

The SEC had refused to comply with the order, arguing that that would be a violation of “attorney-client privilege,” claiming that Hinman, who stepped down in 2020, reached out to the SEC staff “to obtain their legal advice.”

The SEC had also argued that Hinman’s comments didn’t reflect the agency’s policy position.

The judge hit the SEC for making what has become a major issue in its legal brawl with Ripple, which it accused of failing to register $1.4 billion worth of XRP as securities, “unnecessarily complicated” through its “litigation tactics.”

“The hypocrisy in arguing to the court, on the one hand, that the speech is not relevant to the market’s understanding of how or whether the SEC will regulate cryptocurrency, and on the other hand, that Hinman sought and obtained legal advice from SEC counsel in drafting his speech, suggests that the SEC is adopting its litigation positions to further its desired goal, and not out of a faithful allegiance to the law,” Netburn wrote.

The documents, which presumably includes comments of SEC staff on Hinman’s draft speech, have become critical in the case given the regulator’s allegation that Ripple executives “were objectively reckless in believing that XRP was not a security” and that, in fact, the company was on “fair notice” that it was, the judge wrote.

The SEC declined to comment.

Marc Fagel, a former SEC regional director in San Francisco, said the case is “unusual” given the way the court has “placed those internal deliberations squarely at issue.”

“The SEC generally seeks broad protection for its internal deliberations,” he told Protocol. “In theory, this encourages the SEC staff — who can’t themselves set policy — to speak freely amongst themselves without worrying about binding the SEC to some position it has not formally taken.”

Ripple’s battle with the SEC, which is expected to drag on until early next year, has become a closely watched case given its potentially far-reaching consequences for the crypto industry.

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Bulletins