Stuart Alderoty, the chief legal officer at Ripple, is calling for a new investigation into the former U.S. Securities and Exchange Commission’s (SEC) director Bill Hinman.

Specifically, he wants to unearth the reasons behind his 2018 speech on crypto transactions and the application of the Howey test.

In that speech delivered in June 2018, Hinman stated that Ethereum (ETH) shouldn’t be considered a security as it was “sufficiently decentralized,” something that caused confusion when the SEC later sued Ripple Labs for allegedly selling $1.6 billion worth of XRP as an unregistered security.

The documents related to Hinman’s speech were formally unsealed and made public on Tuesday, shedding light on the internal discussions that occurred among SEC staff at the time.


Delving into the behind-the-scenes events, Alderoty now claims that Hinman “invented factors” that should be taken into consideration when determining what “sufficiently decentralized” actually is.

He also urged the SEC to remove the speech from its website, as well as initiate an investigation into the former director.

“An investigation must be conducted to understand what or who influenced Hinman, why conflicts (or, at the very least, appearances of conflicts) were ignored, and why the SEC touted the speech knowing that it would create “greater confusion,” said Alderoty in a lengthy Twitter thread Tuesday.


According to Alderoty, the emails provide clear evidence that Hinman ignored multiple warnings that the speech contained “made-up analysis with no basis in law” and created “greater confusion” in the crypto market.

“Despite the SEC repeatedly flip-flopping on the significance of the speech in litigation, it remains on the agency’s website,” said Ripple’s chief legal officer.

Hinman ignored SEC concerns

Citing parts of the documents, Alderoty also argued that the unsealed emails show dissent among SEC officials regarding certain aspects of Hinman's speech and that Hinman ignored their concerns.

“Now let’s look at what senior SEC officials directly said to Hinman about his speech as he was drafting it,” he wrote. “Head of Trading and Markets (T&M) said, because the list of factors is so extensive–and appears to include things that go beyond the typical Howey analysis–we have concerns this might lead to greater confusion on what is a security.”

Alderoty added that “Hinman ignored those concerns.”

The Howey test is a legal framework used by the SEC to determine whether a particular transaction qualifies as an investment contract, and thus, a security. While the Howey test was originally formulated in the context of traditional investments, the Wall Street regulator has been applying it to cryptocurrencies to assess whether certain tokens or coins should be classified as securities.


According to Alderoty, T&M also directly asked Hinman to tie his newly invented factors “more closely and explicitly to the Howey analysis.” Again, Hinman ignored the suggestion.”

He also noted that T&M and the Office of General Counsel (OGC) pointed to Hinman skipping over the “threshold jurisdictional question” of whether a digital asset meets the legal standards of a security.

“Hinman’s speech should never again be invoked in any serious discussion about whether a token is or is not a security,” stated Alderoty. “Unelected bureaucrats must faithfully apply the law within the constraints of their jurisdiction.”

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