Ripple Obtains Long-Sought Documents of Former SEC Official Who Declared Ethereum Not a Security

A veritable treasure trove of email messages and documents from within the Securities and Exchange Commission has been turned over to Ripple, whose founders created the XRP cryptocurrency and now find themselves as defendants in a high-profile legal battle with the regulatory agency over its assertion that XRP was illegally sold as an unregistered security.

Stuart Alderoty, Ripple general counsel, broke the news on Twitter on Thursday, declaring victory in an 18-month battle (within the larger war) over the collection of discovery materials dubbed "the Hinman documents."

The documents revolve around former SEC director William Hinman and a much-publicized speech he delivered in 2018 declaring that Ethereum—like Bitcoin—was "sufficiently decentralized" and thus not subject to federal securities regulation.

Hinman's remarks that day represent the thickest cloud currently looming over ongoing debates over crypto regulations, and play a key role in the SEC's December 2020 lawsuit against Ripple, asserting that Ripple sold XRP as an unregistered security. With a market cap of $22.3 billion, according to CoinGecko, XRP is currently the sixth-largest cryptocurrency.

Last month, a federal district judge overruled the SEC’s repeated attempts to prevent Ripple from accessing the documents, which the company believes will reveal internal deliberations and discussions that led to the controversial declaration that seems to favor “two winners” in the crypto space, Bitcoin and Ethereum, at the expense of alternatives like XRP.

Ripple initially won the right to request the documents in January. Some industry watchers felt that the documents wouldn't substantially strengthen Ripple's case, but according to Alderoty, those assumptions are wrong.

"While they remain confidential for now (at the SEC's insistence), I can say that it was well worth the fight to get them," he tweeted. "I’ve always felt good about our legal arguments, and I feel even better now. I always felt bad about the SEC’s tactics, and I feel even worse about them now."

Ripple CEO Brad Garlinghouse went even further. Even as his company celebrated its 10th anniversary hours before the documents were released, he was fuming on Twitter.

"The SEC’s pursuit of a policy objective isn’t about 'a faithful allegiance to the law'—it’s about power," he wrote. "There is no regard for those companies and people that this approach has harmed. We all should be outraged. The SEC has clearly forgotten that the government works for the people."

In response to the announcement from his general counsel, Garlinghouse again slammed the SEC, saying "don't believe them" when they claim to care about "disclosure, transparency and clarity."

"When the truth eventually comes out, the shamefulness of their behavior here will shock you," he added.

Although gaining access to documents surrounding Hinman's 2018 speech might provide significant insight into his thought process and that of his colleagues at the SEC, Ripple's attorneys also expect to be able to hear from Hinman directly, having won the opportunity to depose the former SEC director last year. That decision came shortly after another court blocked the SEC's attempt to access records surrounding Ripple's executive compensation.

The development will surely rekindle the long-running dispute, in which both Ripple and the SEC recently called for a summary judgement in lieu of a trial. The push for an expedited end to the case preceded a 44% increase in the value of XRP.

Ripple had opposed the SEC's motion, declaring that the agency "still has no viable legal theory to support its central claim" that Ripple was required to register XRP as a security.

Just last week, a judge granted a request from individual XRP holders to join the proceedings.

Notably, current SEC chair Gary Gensler has not commented publicly and specifically on Hinman's assessment, and has limited his remarks to Bitcoin—avoiding the Ethereum waters that swamped director Hinman.