After months of legal wrangling, the SEC finally agreed to release documents that Ripple says could shed light on the agency’s thinking on crypto as it pursues a lawsuit against the crypto company. The case, over whether XRP is a security, remains closely watched, as it could set a legal precedent affecting the entire industry.
The crypto powerhouse's leadership marked the win by ripping into the regulator now widely viewed as the industry’s nemesis.
“The SEC wants you to think that it cares about disclosure, transparency and clarity,” CEO Brad Garlinghouse said in a tweet. “Don’t believe them. When the truth eventually comes out, the shamefulness of their behavior here will shock you.”
An SEC spokesperson said the agency had no comment.
The SEC and Ripple have been embroiled in a legal battle since 2020, when the agency sued the crypto company for alleged securities laws violations. The SEC has argued that Ripple failed to register roughly $1.4 billion worth of XRP, the cryptocurrency used on the Ripple network, as securities.
Ripple rejected the claim. The case, which has dragged on for more than a year and a half, centers on the SEC’s argument that most cryptocurrencies should be regulated as securities.
Ripple has hit back at this argument by citing former SEC director William Hinman’s 2018 speech in which he said ether is not a security. His comments sparked a rally in ether’s price and appeared to endorse the broad view of most in the crypto industry that digital assets aren't securities.
Hinman was a member of the SEC leadership around the time that the agency filed the lawsuit against Ripple. (He stepped down at the end of 2020 and is now an adviser to a16z.)
Ripple demanded that the SEC also release emails and other documents related to the way the Hinman speech was discussed internally. The SEC rejected that demand and appealed a federal judge’s order for them to comply.
Ripple finally prevailed last week. “Over 18 months and 6 court orders later, we finally have the Hinman docs,” Ripple general counsel Stuart Alderoty announced in a tweet.
The documents remain confidential “at the SEC’s existence,” he said, adding, “I can say that it was well worth the fight to get them.”
The potential impact of the disclosures is unclear on the case, which is expected to drag on until early next year.
Marc Fagel, a former SEC regional director in San Francisco who represented clients in the crypto industry when he moved to the private sector, said the regulator took “aggressive approach on protecting the confidentiality of its internal deliberations,” which he argued are “irrelevant to the legal merits of the Ripple case.”
“But obviously the vociferousness of its battle to withhold them suggests there may be something problematic or embarrassing within,” he told Protocol.
This story was updated to clarify Hinman's time at the SEC.