In a slight downturn for Ripple Labs’ XRP, which serves as the backbone for the company’s payment and exchange network services, prices experienced a 1.3% dip in the 24 hours until 10:15 a.m. in Hong Kong. This drop came as a reversal of the gains that had initially followed the release of internal Securities and Exchange Commission (SEC) documents on Tuesday, which Ripple claimed could provide evidence of unfair targeting by the regulator through a lawsuit. Over the past seven days, XRP has witnessed a 2.05% decline.
The legal battle between Ripple and the SEC began in December 2020 when the commission filed a lawsuit accusing Ripple of conducting an unregistered securities offering through the sale of XRP. Ripple’s executive chairman, Chris Larsen, and chief executive officer, Brad Garlinghouse, were also named as co-defendants for allegedly aiding and abetting Ripple’s violations.
As part of the ongoing lawsuit, numerous documents were made public on Tuesday about a speech by former SEC director William Hinman regarding classifying cryptocurrencies as securities. Initially, the SEC had attempted to keep these documents sealed, but in a favorable ruling for Ripple, Judge Analisa Torres of the U.S. District Court for the Southern District of New York ordered their release in May.
In June 2018, Hinman’s speech gained significant importance as he declared that transactions involving the Ether cryptocurrency were not securities transactions. He emphasized that applying the federal securities laws’ disclosure regime to Ether transactions would yield minimal benefits, much like Bitcoin. Ripple has since utilized this speech to support its fair notice defense in the ongoing legal battle.
The newly released documents include email exchanges between Hinman and several SEC staffers while preparing his 2018 speech. Notably, one email revealed an SEC employee’s comment on the draft, expressing concerns that taking an overly definitive stance against the disclosure provisions of federal securities laws might undermine the SEC’s efforts regarding other crypto-assets classified as securities while emphasizing the SEC’s reluctance to label Bitcoin as such.
Stuart Alderoty, Ripple’s chief legal officer, has called for an investigation into Hinman’s conduct, claiming that the documents demonstrate Hinman’s disregard for multiple warnings and reliance on fabricated legal analysis. According to Alderoty, these actions showcase the SEC’s flip-flopping behavior and encroachment beyond its jurisdictional boundaries.
Echoing these sentiments, Ripple Labs CEO Brad Garlinghouse criticized the regulator for proceeding with Hinman’s speech despite internal opposition, describing it as “absolutely unconscionable.” Garlinghouse further asserted that the SEC exploited the lack of regulatory clarity, effectively weaponized it through their enforcement actions since the speech was delivered.
The recent minor dip in XRP prices following the release of SEC documents sheds light on the ongoing legal battle between Ripple and the regulatory authority. Ripple’s claims of unfair targeting gain traction as the newly revealed documents indicate potential misconduct by William Hinman. The consequences of this legal dispute continue to ripple through the cryptocurrency community, emphasizing the need for clarity in regulatory frameworks governing digital assets.
