Ripple Releases Hinman Docs, Info Suggests SEC Collaboration with Vitalik

Ripple finally released the Hinman docs, revealing that Hinman ignored warnings from SEC officials and worked closely with Vitalik.

In a significant development in the Ripple vs. SEC lawsuit, Ripple has finally made public the long-awaited Hinman documents, shedding light on William Hinman’s controversial speech and revealing a potential collaboration with Vitalik Buterin.

The recently released emails and speech drafts, unveiled after 18 months and multiple court orders, provide crucial insights into the behind-the-scenes details of Hinman’s statement. Less than a month after Judge Torres ruled that the docs should be made public.

1/ It’s been 5 years since Bill Hinman gave his infamous speech – and through the SEC’s lawsuit against @Ripple (and 7 court orders), we can finally share what happened behind the scenes through the now public emails / drafts of the speech. pic.twitter.com/sx2TpW0TYe

— Stuart Alderoty (@s_alderoty) June 13, 2023

Stuart Alderoty, Ripple’s Chief Legal Officer, claims that the documents expose Hinman’s disregard for warnings about the lack of basis for his analysis and its deviation from established legal principles outlined by the Howey test. This speech not only confused the market but also exposed gaps in regulatory oversight.

In his June 2018 speech, Hinman introduced the idea that a token would no longer be considered a security once it achieved a specific level of decentralization. He proposed new criteria to determine this threshold.

Initially presented as Hinman’s personal opinion, the speech gained significance when the SEC later embraced it as guidance, with former SEC Chairperson Jay Clayton publicly endorsing it. Despite the SEC’s changing stance on the speech during legal proceedings, it remains accessible on the agency’s website.

Hinman Ignored Concerns from SEC Officials

The newly revealed documents highlight concerns raised by senior SEC officials during the drafting phase. The Head of Trading and Markets (T&M) highlighted issues about the broad array of factors, suggesting they exceeded the scope of the established Howey analysis. 

T&M recommended aligning the new factors more closely with the Howey test, but Hinman ignored this suggestion.

The Office of General Counsel (OGC) and T&M criticized a factor regarding the retention of interest in a digital asset, considering it legally irrelevant. However, despite objections, Hinman chose to include this factor in the final version of the speech.

Furthermore, the documents disclose that Hinman overlooked the initial jurisdictional inquiry into whether a digital asset met the legal criteria of a security. Instead, he focused on the potential benefits of SEC oversight, neglecting this regulatory loophole in his analysis.

Alleged Collaboration with Vitalik

On June 4, 2018, Hinman expressed that the SEC should not regulate Ether (ETH) as a security. Interestingly, the documents unveil that Hinman would later contact Vitalik Buterin, the founder of Ethereum, to “confirm” the operational structure of the Ethereum Foundation.

However, the OGC expressed concerns about explicitly mentioning ETH in the speech, as it could potentially restrict the agency from adopting a different position on ETH in the future. Nonetheless, ETH was still cited as an example in the final version of the speech.

In response to these revelations, Ripple demands the immediate removal of Hinman’s speech from the SEC’s website. Ripple’s Chief Legal Officer calls for an investigation into the influences on Hinman, identification of potential conflicts of interest, and an understanding why the SEC promoted the speech despite its potential to cause further confusion.

Ripple also argues that Hinman’s speech should no longer be considered in discussions on security classifications. The focus should instead be on impartially applying existing laws within jurisdictional boundaries rather than creating new laws, as Hinman allegedly did.