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Until a week ago, it was clear that only the plaintiffs in the ongoing SEC v. Ripple litigation were eager to depose further witnesses. However, it was recently revealed that the defendants wanted to depose an other office-bearer as well. With only the hints of ‘former SEC official,’ the community began generating their own speculations as to who it may be. Among the many possibilities available, two names jumped out as particularly intriguing – Jay Clayton and William Hinman.
In what is the latest development in the same, the SEC has now filed a motion to quash the deposition of its official. Unsurprisingly, the ‘former SEC official’ named by Ripple is SEC’s former Director in-charge of the Corporate Finance division, William Hinman. According to the plaintiff’s motion,
“To depose a former high-ranking government official like Director Hinman, Defendants bear the burden of showing ‘exceptional circumstances’ justifying the deposition.”
It should be emphasised that the “exceptional circumstances” provision is intended to “protect the mental process” of government employees. The defendants have argued that they need to depose the official in order to obtain testimony on the SEC’s “internal views” and to produce evidence on “market participants’ views” based on Hinman’s encounters with members of the public. The SEC, on the other hand, argued,
“… these proposed inquiries… could be obtained by far less intrusive means.”
The SEC further stated that the answers the blockchain company seeks are protected by privilege since they relate to the everyday tasks of most high-ranking government officials.
“Director Hinman has no personal, first-hand knowledge as to defendants’ offers and sales of XRP.”
It should be emphasised here that the official was a member of the SEC’s fact-finding team that probed Ripple’s behaviour between 2018 and 2020. In addition, he and his colleagues have gone over written submissions from the defendants’ counsel.
Further, the federal agency noted in its motion that XRP holders had shared false information about Hinman. Attorney John E. Deaton was quick to react, however, opining,
“What’s false?… Maybe allowing the deposition to go forward will make future high ranking officials more accountable regarding the things that they say.”
As previously noted, Hinman gave a public lecture in 2018 in which he expressly declared that Ether offers and sales were “not securities transactions.” However, he made no claims regarding XRP or Ripple at the time.
Furthermore, Hinman stated in the documents attached to the motion that the SEC has yet to rule on whether the offer and sale of Ether falls within the category of securities. According to attorney James K. Filan, this ominous remark “should scare everyone.”