Judge denies SEC’s motion to withhold key documents in Ripple case

In the SEC vs. Ripple case, the latest court filing showed Judge Netburn denied a motion by the U.S. securities regulator to withhold internal documents.

The documents relate to a speech by the then Director of the Division of Corporate Finance, William Hinman, on June 14, 2018.

During the speech, Hinman gave Bitcoin and Ether the green light, saying neither fit the characteristics of a security and so are exempt from registering under U.S. securities law.

In the motion, the SEC claimed the documents fall under attorney-client privilege, which protects confidential communications, between attorneys and clients, from being disclosed to third parties.

However, Judge Netburn ruled the SEC must submit the documents for “in-camera review.” This refers to a process where the presiding judge examines confidential or sensitive information to determine whether the information may be used by a party or made public.

Judge Netburn strikes down the attorney-client privilege claim

For the attorney-client privilege to apply, Judge Netburn said an attorney-client relationship needed to be demonstrated, the communication must be confidential, and the “predominant purpose” of the communication was to seek or provide legal advice.

According to the filing, the SEC claimed that in his capacity as Director, Hinman was a client of the SEC lawyers, sought legal advice in drafting and editing the speech, and the documents were confidential.

However, Judge Netburn said the court does not need to establish whether Hinman was a “client” of the SEC’s lawyers, as the evidence showed that the predominant purpose of communications was not to provide legal advice.

In addition, the judge slammed the attempt to withhold the documents as “hypocrisy.” In that, the agency argued Hinman’s speech was not relevant to the market’s understanding of cryptocurrency regulation while at the same time claiming that Hinman had sought legal advice in drafting the speech.

Ripple’s case boosted

The filing added that communications between Hinman and the SEC’s lawyers were more accurately classified as “policy advice,” such as whether a statement is a good or bad idea.

“The law is settled that policy advice—like whether it is a good idea or a bad idea to make a particular public statement as a public figure—or communication advice—like whether a statement is on-message with the agency’s position.”

Judge Netburn wrote that policy advice is distinct from legal advice, even if the advice is coming from a lawyer. That being so, the communications between Hinman and the SEC’s lawyers regarding the speech are not protected under attorney-client privilege.

The judge ordered the SEC to submit the requested documents for in-camera review.