Breaking News: Hinman Emails Expose SEC Officials’ Involvement in 2018 Ether Speech

Key Points:

• The SEC deliberates whether Ether is a security, according to emails published by Ripple. XRP spiked in price after the emails were released.
• SEC officials wanted clarity on Hinman’s 2018 speech about Ether. Laura Jarsulic suggested using the Howey Test. Ripple faces allegations of selling unregistered securities.
• Some officials suggested tying the speech closer to the Howey Test. The case has an impact on XRP prices.

According to a recent news release, SEC official stated that the agency did not believe that there was a need to regulate Ether when it was offered in 2018.

This statement was made in an email that was released on Tuesday and is linked to the 2018 speech by William Hinman, the one-time Director of Corporation Finance, in which he stated that Ether did not look like a security. The contents of this email were published by Ripple, alongside an updated motion for summary judgment, as part of its ongoing defense against an SEC lawsuit alleging that the company illegally sold XRP tokens as an unregistered security for over seven years. After the emails were initially released, XRP’s price spiked.

The emails also reveal that SEC officials were deliberating about how clear the speech actually was in expressing a view that Ether was not a security. One email from former SEC Director of Trading and Markets Brett Redfearn on June 12, 2018, suggested that the language used in the speech was vague and could have been stronger if they wanted to make an affirmative statement that Ether was not a security.

He recommended using language similar to what was used for Bitcoin regarding the disclosure regime to make it more consistent. In addition, former SEC Enforcement Directors Stephanie Avakian and Steven Peikin, former Division of Investment Management Director Dalia Blass, and former Chief Counsel and Acting Director of the Division of Trading and Markets Heather Seidel were cc’d in the emails.

Valerie Szczepanik, the current head of the SEC’s FinHub group, suggested in an earlier email dated May 25, 2018, that she believed “the less detail the better” and that leaving room for discussion would be good. This earlier version of the speech did not mention Ether at all, although it did reference Bitcoin.

Laura Jarsulic, an attorney with the SEC’s Office of General Counsel, suggested an edit to clarify that the Supreme Court ruled that purchasers who bought trees but did not buy investment contracts did not purchase securities. She also wrote in a suggestion that there could be situations where a token is indeed a security, such as if a company issues tokens instead of shares. Several of the officials’ emails suggested tying the speech closer to the Howey Test, which is commonly used as a test for determining whether something is a security even today.

The release of these emails has shed light on the SEC’s thoughts regarding Ether and XRP tokens, and how their officials were grappling with the issue of whether they should regulate these tokens. It has also revealed the thought process of key SEC officials like Brett Redfearn, Valerie Szczepanik, and Laura Jarsulic, and how they approached the issue of determining whether a token is a security.

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Annie

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