XRP, the digital asset used by Ripple Labs for its payment and exchange network services, experienced a 1.3% price drop within a 24-hour period until 10:15 a.m. in Hong Kong. This decline came after an initial surge following the release of internal Securities and Exchange Commission (SEC) documents, which Ripple claimed could demonstrate that the company was unfairly targeted by the regulator's lawsuit. Over the past seven days, XRP has seen a 2.05% decrease in value.
In December 2020, the SEC filed a lawsuit against Ripple, accusing the company of conducting an unregistered securities offering through the sale of XRP. The lawsuit also named Ripple's executive chairman, Chris Larsen, and CEO, Brad Garlinghouse, as co-defendants, alleging that they had aided and abetted Ripple's violations.
As part of this ongoing legal battle, numerous documents related to a speech delivered by former SEC director William Hinman regarding the classification of cryptocurrencies as securities were released on Tuesday. Initially, the SEC had sought to keep these documents sealed, but in May, Judge Analisa Torres of the U.S. District Court for the Southern District of New York ruled in favor of making them public, which was seen as a favorable development for Ripple.
In a speech from June 2018, Hinman stated that sales of the Ether cryptocurrency were not considered securities transactions, and he questioned the value of applying federal securities laws' disclosure requirements to transactions involving Ether and Bitcoin. Ripple has seized upon this speech as a crucial element in its fair notice defense.
The released documents include email exchanges between Hinman and several SEC staffers in preparation for his 2018 speech. In one email, an SEC employee commented on the draft: "Although we do not want to suggest that BTC is a security, taking too strong a position on the lack of any benefits from the disclosure provisions of the federal securities laws...might be a wedge that could undermine SEC efforts towards other crypto-assets where the asset is a security."
Stuart Alderoty, Ripple's chief legal officer, is calling for investigations into Hinman's conduct. Alderoty tweeted on Tuesday, stating, "An investigation must be conducted to understand what or who influenced Hinman." According to Alderoty, the documents reveal that "Hinman ignored multiple warnings that his speech contained made-up analysis with no basis in law" and demonstrate that the SEC exceeded its jurisdiction and changed its stance inconsistently.
Ripple's CEO, Brad Garlinghouse, criticized the regulator's decision to proceed with the speech despite internal opposition, stating in a tweet on Tuesday that it is "absolutely unconscionable." He further accused the SEC of leveraging the lack of regulatory clarity, resulting in enforcement actions since Hinman's speech, implying that this has created an unfair and uncertain environment.
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