Ripple Labs has received the court’s approval to question a former high-level Securities and Exchange Official, William Hinman, as a part of its legal battle with the financial markets regulator. The deposition will focus on the agency’s policy decisions on cryptocurrencies.
Hinman served the US regulator from 2017 and 2020 as the Director of its Division of Corporation Finance. Then, he oversaw the rise of blank-check firms, confidential filings and other alternatives to traditional initial public offerings and direct listings.
However, he parted from the agency in January this year to join Simpson Thacher & Bartlett LLP as a Senior Advisor and, in May, joined another investment platform as a Partner and a Senior Policy Advisor.
With Hinman’s testimony Ripple wants to understand the process the regulator follows to mandate a policy decision. Hinman also publicly said in a speech in 2018 that Bitcoin and Ether are not securities and Ripple is now trying to establish such grounds over SEC’s allegations of XRP being an unregistered security.
A Dangerous Precedent?
Moreover, the SEC opposed the blockchain company’s move to question a former high-level official, arguing that such depositions would ‘disrupt the functioning of government agencies by discouraging qualified people from public service given the near certainty that their tenures would ensnare them in litigation’.
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However, US Magistrate Judge Sarah Netburn was not convinced with the regulator’s arguments and ruled in favor of Ripple on the deposition.
“This is not a run-of-the-mill SEC enforcement case,” Judge Netburn said, adding that the case “involves significant policy decisions in our markets, the amount in controversy is substantial and the public’s interest, in this case, is significant.”
Though the SEC successfully went after several high-profile ICOs and cryptocurrencies, its fight against Ripple is believed to be the one with the most impact. According to the agency, the blockchain firm raised $1.3 billion over the years by selling XRP tokens that can be categorized as a security.
But, Ripple is saying that XRP is a medium of exchange for domestic and international transactions and is not a security.