The Securities and Exchange Commission (SEC) has filed to have documents shielded that show its former finance director acknowledged that bitcoin and Ethereum are not securities.
William Hinman said in a speech in June 2018 that according to his understanding, “current offers and sales of Ether are not securities transactions.”
The new motion includes the re-assertion of the SEC’s case that Hinman’s statements fall under attorney-client privilege since they were made as part of an exchange between Hinman and SEC lawyers.
The motion read, “The privilege applies because these documents, in whole, or in part, reflect communications between Director Hinman and SEC attorneys requesting and providing legal advice about a matter under the SEC’s purview – when an offer or sale of a particular digital asset constitutes an investment contract and thus a securities offering as defined in the federal securities laws – and correspondingly, what director Hinman could say about this matter in the speech.”
Judge denied SEC appeal
Judge Sarah Netburn denied an appeal last month made by the SEC to overturn a ruling made on the speech in Jan this year.
Last July, Ripple sought to quiz Hinman on his thinking regarding Ethereum at the time to build a similar argument for XRP. The SEC filed a motion to deny Ripple’s request for Hinman to appear at a deposition, saying that would create a precedent that would normalize the deposition of high-ranking government officials.
The SEC went on to say that it does not speak through staff but through enforcement. Hence anything Hinman said becomes “deliberative” and privileged. Judge Netburn threw out this argument, saying that the unique nature of 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.”
The deliberative process privilege protects “documents reflecting advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated” from disclosure.
Another storm is brewing on the Hinman front, as whistleblower Empower Oversight demanded the release of emails from the SEC, in which Hinman corresponded with the law firm Simpson Thacher on multiple occasions despite SEC censure on ethical grounds. Simpson Thacher belongs to a consortium called the Enterprise Ethereum Alliance.
The SEC filed a lawsuit against Ripple and its leadership in Dec 2020 accusing the company of selling unregistered securities to raise funds, in contravention of Section 5 of the Securities Act of 1933.