SEC vs Ripple Lawsuit: SEC Accused of Erasing XRP Documents

August 20, 2021, 11:30 AM AEST - 1 month ago

In a sensational development pertaining to its case against Ripple in the US Federal Court, the Securities and Exchange Commission (SEC) has been accused of “deleting” material relevant to Ripple’s lawsuit.

Ripple’s action is in response to SEC allegations that it raised over US$1 billion from the sale of unregistered digital asset securities including XRP, Ripple’s payment protocol.

Former SEC Corporate Finance Director Warned Ripple to Cease and Desist

The erasure accusation made by Ripple relates to a deposition transcript by William Hinman, SEC’s former corporate finance director, in which Hinman said he met with Ripple representatives and told them he considered Ripple’s sales of XRP to be sales of securities, and that Ripple should stop its unregistered sales.

Lawyers for Ripple claim the transcript seems to indicate that the SEC tried to delete material directly related to Hinman’s testimony. Reid Figel, for Ripple, pointed the finger at SEC Special Counsel Michael Seaman.

“In our review of the metadata, it says ‘deleted by Michael Seaman’,” Figel alleged.

SEC lead counsel Jorge Tenreiro then asked Hinman if he directed Seaman to delete the material, and whether he remembered doing so. Hinman replied: “I don’t recall directing him to do that.”

Much of the deleted portion of the SEC document was Hinman’s answer to the question: “Other than the issues with respect to Ripple, can you identify any other lawyers that came to you … seeking guidance with respect to transactions in digital assets?”

His response was colourful, to say the least:

You call 10 different law firms, they’ll give you 10 different answers, and each of them has their own particular spin. It’s like the white light of your speech went through a prism and came out in 10 different shades of legal advice.

William Hinman, former corporate finance director, SEC

Ripple Refuses to Hand Over Internal Slack Messages

This followed earlier testimony in the case where Ripple explained to Judge Sarah Netburn why it refuses to hand over internal Slack messages and other communications to the SEC.

The SEC’s extraordinary demand calls for an extensive and costly fishing expedition that would likely take months to complete and come at very significant cost. [We’re talking] over one million pages of discovery, including emails, documents, text messages, and responsive Slack messages [involving] 33 custodians.

Ripple’s letter to Judge Sarah Netburn, SEC vs Ripple

The SEC vs Ripple lawsuit is likely to present regular updates throughout the rest of the month up until August 31, the deadline for fact discovery.

Ripple’s legal team continues to insist that it falls outside of the SEC’s charter and that the federal case is “dead wrong”. Whatever the outcome, the market is betting that Ripple will prevail and its management team will press ahead with a public offering to raise its profile and a significant pool of funds. 

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