Ripple is citing a U.S. Securities and Exchange Commission (SEC) letter to a retail investor in its ongoing legal battle against the top US regulator.
A Twitter user named “Frank” claims that he reached out to the SEC after buying XRP to see whether he purchased a security.
In a viral tweet, the user shared a screenshot of the SEC’s response, which indicated that as of October 2020, the regulator hadn’t issued a determination on the digital asset’s status as a security.
@Ripple @SEC_News @HesterPeirce I have bought XRP early 2018 and wasn’t sure if I bought an security because there was no decision yet. So I asked the SEC here the answer to my concerns. Are they lying to me???? #XRPCommunity @bgarlinghouse @BrianBrooksOCC @galgitron pic.twitter.com/qCMXTh9vNL
— frank (@frank14492100) December 24, 2020
Two months later, the SEC filed a lawsuit alleging Ripple offered XRP as an unregistered security.
Ripple is now citing Frank’s SEC email exchange in a court filing. The San Francisco company is using the letter in regard to statements made by William Hinman, the former director of the SEC’s Division of Corporate Finance, who says he told a Ripple official that he viewed XRP as an unregistered security.
Ripple says the email is evidence Hinman’s testimony “is refuted by the SEC’s own communications to the public.”
According to Ripple, Hinman’s description of the SEC’s early history with crypto assets also shows why the SEC’s case is flawed.
“Merely by way of example, Mr. Hinman admitted that prior to him joining the SEC in 2017 – but years into the alleged unregistered securities offering by Ripple – the application of the federal securities laws to digital assets was ‘new for everyone’ and no one knew a whole lot’…
He further admitted that he could not recall any specific work product generated at the time he joined the SEC relating to federal securities laws and bitcoin, ether or XRP and did not ‘think people had completely thought through all the ways… the securities laws may apply to that activity.’
This testimony, the documents produced – and potentially the documents that should be produced in discovery as a result of Defendants’ Motion – fatally undermine the SEC’s allegations that the Individual Defendants acted recklessly in failing to recognize Ripple’s sales of XRP as an unregistered securities offering as at that time, securities law experts of Mr. Hinman’s stature (to say nothing of the full Commission) had not reached that conclusion themselves, despite looking into the issue.”
Attorney James Filan, who is closely tracking the case, has put together an outline of key dates ahead.
The end of the discovery process, which allows both parties to learn what the other knows about the evidence in the case, is set to end on August 31st.