The highly tense legal disputes between Ripple Labs and the United States Securities and Exchange Commission (SEC) have gone nuclear after previously confidential documents from former SEC’s financial director William Hinman have been released publicly.
The ‘Hinman Documents’ reveal seemingly politically motivated, ill-manoeuvred attempts by the SEC to suppress and destroy Ripple Labs and all XRP investors.
Various stakeholders, especially those holding XRP shares are keeping tabs on this decisive phase between the Ripple Labs vs SEC saga, which has implications not only for XRP shareholders but also for the entire cryptocurrency industry.
Ripple Labs vs SEC: A Tumultuous History
Ripple Labs is a financial technology company in San Francisco, California, USA. It was founded in 2012 with the purpose of offering banks a speedy, smooth, and inexpensive option for conducting cross-border transactions. It is an alternative to the SWIFT network (Society for Worldwide Interbank Financial Telecommunication), which was launched in the 1970s. The Ripple Network, a blockchain payments system, conducts payments and transfers through its native cryptocurrency, XRP.
Prior to the SEC lawsuit, Ripple Labs XRP had been considered a ‘stablecoin’ in the cryptocurrency world, along with Bitcoin (BTC) and Ethereum (ETH). Ripple has raised up to $293.8 million and has 43 big-time investors worldwide since its launch in 2012, and has generated up to 12,758.41% returned profits to its investors within nine years.
All major ‘stablecoins’ have had some initial hurdles and resistance from the public before becoming mainstream, the same way Bitcoin (BTC) was not taken seriously until investors came in and its value rocketed, thus making millionaires from the ordinary individuals who traded in some cash for what was then known as ‘speculative investing’.
However, the backlash against Ripple’s XRP came years later after it had been launched way back in 2012, and it caused – and still continues to cause – a lot of controversy due to what was deemed unfair judgement by the SEC.
On December 22 of 2020, the United States Securities and Exchange Commission (SEC) declared that Ripple Labs’ native cryptocurrency XRP was not qualified as a currency but only as a security, thus putting its $1.38 billion worth of investments at risk of being classified as an unregistered security. “Security” is defined as a financial asset within a corporation that has no utility to the general public. TheSEC claims that Ripple Labs, under the leadership of Brad Garlinghouse and Chris Larsen, debuted XRP as an initial public offering (IPO) and used those funds to sell $1.38 billion worth of XRP.
Furthermore, the SEC alleged that Ripple illegally sold $1.3 billion of “unregistered securities” and that “the failure to register the XRP sales…constitutes a violation of federal securities law.”
SEC’s lawsuit caused XRP to be delisted from various major cryptocurrency market platforms. Coinbase, the world’s leading crypto platform, has also been embroiled in a legal dispute with SEC for initially publicly supporting XRP, although it later delisted XRP after being pressured by the SEC. Despite the ongoing controversies between SEC and Ripple Labs, XRP remained among the top stablecoins in the cryptocurrency world, but it did suffer losses, slowing down its growth and creating a bear market since its platform delisting.
The Hinman Documents
Less than a week ago, documents were released relating to remarks made by William
Hinman, SEC’s former director, whose statements seem to be a stark contrast to the antagonistic lawsuits filed by SEC under its new director Gary Gensler.
After nearly 18 months of court battles, Ripple’s lawyers obtained access to the ‘Hinman Documents’, which contained statements from William Hinman, who was director of the Division of Corporation Finance at the Securities and Exchange Commission from 2017 to 2020.
The documents seem to support Ripple Labs’ argument that XRP is a currency. In a 2018 speech, Hinman implied that Ether (ETH), another cryptocurrency native to the platform Ethereum, should not be considered a security, meaning that it could not be regulated by the SEC.
However, the Hinman Documents also caused a great deal of speculation as to whether Hinman’s opinion represented his personal view or the official stance of the SEC. The recently-released documents suggest that other members of the SEC were in agreement with Hinman. Indeed, SEC chairman Jay Clayton at the time pointed to Hinman’s speech favorably, as something that exemplified the official stance of the SEC. Thus, even though the SEC is currently claiming that Ripple’s cryptocurrency XRP should be regulated as a security, the evidence suggests that the SEC has taken the opposite view toward cryptocurrencies in the past, and has basically given Ethereum and its cryptocurrency ETH a free pass. In short, the SEC appears to be contradicting itself and being unfair to Ripple Labs.
Indeed, Ripple’s lawyers argued that XRP had been recognized by the government as a legitimate currency, thus placing the sale of it outside the purview of securities law. Ripple’s lawyers also claimed that they weren’t notified by the SEC that XRP was going to be classified as a security instead of as a publicly tradeable currency.
The Forecast
Various cryptocurrency enthusiasts, financial analysts, and even legal experts predict favourable odds for Ripple Labs. This saga has also been seen by the cryptocurrency community as a cryptocurrency witch hunt, causing much public online backlash against SEC and Gary Gensler.
There has not yet been any final court ruling on this case. However, if Ripple Labs wins, then experts predict a bull market for XRP as soon as it gets re-listed on major cryptocurrency platforms and stellar profit returns for all XRP holders and investors that could quickly catch up with, if not exceed Bitcoin (BTC). Indeed, XRP could very well be ‘the next Bitcoin’.
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