By James Davis
Ripple’s Chief Legal Officer Stuart Alderoty now wants an investigation launched into Bill Hinman, the US Securities and Exchange Commission’s (SEC) former director. Alderoty says he would like to know Hinman’s motives behind the speech he delivered in 2018.
At the time, the SEC’s ex-director declared that Ethereum was not a security since it was adequately decentralized. His statement led to confusion two years later when the SEC charged Ripple with violating securities rules by offering an unlicensed security, XRP.
On Tuesday, the documents containing Hinman’s speech got unsealed, revealing the director’s discussions with the SEC employees. Alderoty was among the first crypto players to comment on the matter. On his Twitter account, the law expert said Hinman did not apply the Howey Test but used invented factors to determine which tokens fit the “security” description.
Alderoty also claimed that Hinman ignored several warnings from his colleagues who told him his speech could cause confusion in the crypto market. He then requested that the SEC pull Hinman’s documents from its website and investigate its former director.
Hinman Disregarded SEC’s Concerns – Alderoty
Hinman’s documents had emails that showed various SEC officials expressing concerns over his speech, which Alderoty says were ignored by the ex-director. A notable email came from the SEC’s Head of Trading and Markets, who told Hinman that his drafted speech was not based on the Howey Test, a legal framework the Commission employs when classifying security and non-security tokens.
Howey Test was initially established for traditional investments like stocks, but the SEC has been using it on cryptocurrencies as there are no clear regulations for digital assets at the moment.
Meanwhile, despite the Head of Trading and Markets warning Hinman and asking him to base his analysis on Howey Test, Alderoty said the ex-director did not bother and went ahead to deliver his speech in July 2018.
Alderoty ended his long Twitter thread by saying that Hinman’s speech must never be referenced in any serious debate about which tokens are security and which ones are not, arguing that it is full of made-up analysis.