Ex-SEC Director Reveals Effects of Hinman Emails on SEC

A former SEC regional director has disclosed the effects Hinman’s emails might have on the SEC and the broader Ripple lawsuit.

Marc Fagel, a former Regional Director at the US SEC, has commented on the release of Bill Hinman’s documents. In a recent CryptoLaw TV talk show, Fagel explained the possible effects of the release of the documents on the SEC and its bearing on the broader Ripple vs. SEC case.

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John Deaton, the founder of CryptoLaw, said to Fagel in the recent CryptoLaw talk show. “These emails being public, is it embarrassing to people at the SEC, or is it ‘no big deal’? If you can give that perspective as well, in addition to what your overall thoughts on the emails are,”

In response, Fagel noted that he agrees with Jeremy Hogan, a Florida-based lawyer and another guest on the show, about the ethical aspect of the emails. Hogan had previously stated that the emails being public casts Hinman in a bad light. However, the release does not substantially affect the overall case.

“It’s hard to quarrel with anything Jeremy said on the ethical aspect; it’s really the optics,” Fagel remarked. He noted that he had never met Hinman, so he cannot speculate what motivated him to make the speech. This contrasts Hogan’s conjecture that Hinman might have had a particular interest in Ethereum (ETH) for some reason.

Fagel continued: “But it does seem unusual, and I think people on the staff would chafe at that. Just to give an example, I ran a regional office, and I had over 100 people working for me. I had to tell them when they went to visit an advisor or broker or one of the registrants that we evaluated: they couldn’t take a muffin.”

He emphasized that it was part of the SEC’s ethical structure to ensure that its staff does not take anything offered by entities the agency was evaluating. “The SEC, almost to a fault, is religious about that,” he remarked.

Fagel, who served as Regional Director for almost 16 years, noted that it discourages the staff from witnessing Hinman’s theatrics and the logical conclusions that could be drawn from his actions. He confirmed it is frustrating for him as an alum, and he’s confident the current SEC staff feels the same.

Hinman Emails Have no Bearing on Ripple v. SEC Case

Despite the ethical look and the bad light, the emails put the SEC in, Fagel stressed that the documents do not contain any bombshell that could influence the bearing of the Ripple vs. SEC case.

“There’s no real bombshell here on the merits of the case. I think that’s most important. There’s nothing in here that tells you that there’s a problem for the SEC’s view of whether or not Ripple violated the law through an offering,” he emphasized.

Jeremy Hogan previously made similar remarks, asserting that the emails do not have any dramatic effect on the case. Gabriel Shapiro, General Counsel at Delphi Labs, also holds similar sentiments.

However, Fagel mentioned that the release of the emails could present some defense issues. He presented a scenario where the SEC is potentially deemed incapable of charging individuals for offering unregistered securities when the agency itself is confused about what a security is.

He noted that the SEC’s case had already been weak from the outset, but the release of Hinman’s email made it even weaker. Nonetheless, Fagel concluded by mentioning that Ripple’s fair notice defense has a slim chance of scaling through despite the lack of regulatory clarity.

A fair notice defense is a legal argument asserting that an individual cannot be held accountable for violating a law or regulation if they were not given adequate warning or notice of its existence or requirements. Deaton noted in April that Ripple’s fair notice defense does not lack merit.