| In XRP Case
Ex-SEC Hinman Depo July 27 After Netburn
Rules, Possible Briefing Before
By Matthew
Russell Lee, Patreon Podcast
BBC
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SDNY COURTHOUSE,
July 16 – In SEC v. Ripple
Labs Inc. et al., a discovery
hearing was held on April 30
before U.S. District Court for
the Southern District of New
York Magistrate Judge Netburn.
Inner City Press live
tweeted it, see below,
then put underlying emails on
Patreon here.
On May 21, after
an SEC submission now on
Patreon here,
podcast here,
Judge Netburn held another
conference, this time on
whether the SEC can get access
to legal advise to Ripple.
Inner City Press fought to
cover it and did, live
tweeting it here
and below.
On July 8,
the SEC asked Magistrate Judge
Netburn to quash Ripple's
subpoena to depose William H.
Hinman, former director of the
SEC's Division of Corporate
Finance. Inner City Press
previously filmed
pro-XRP picket on Lexington
Avenue on this topic, and
published the SEC's opposition
on Patreon, here.
On July 15
Judge Netburn held an oral
argument, below, and ruled
that Hinman must sit for the
deposition, given the public
interest. But it may be
delayed a week. Here is Inner
City Press' thread:
(and now pocast here)
Update: Now on
July 16 the parties have
written to Judge Netburn that
Hinman's deposition is being
pushed back to July 27, with
possible briefing before them
to resolve the scope. Watch
this site.
From July 15:
Judge Netburn: I have before
me the subpoena seek to depose
former SEC official Hinman,
and the SEC application to
quash. SEC? SEC's lawyer: If
official have to testify,
years after, it would have a
chilling effect.
SEC lawyer: Let
me cite again your Honor's
decision in the 9/11 case.
From Page 14 of your decision,
you raised the issue of
repetition and [wait for it]
ripple effect. The burden on
Ripple here is high, and they
have not met it. Any
questions? Judge Netburn: Yes
Judge
Netburn: Let's talk about his
2018 speech. The next prong of
the analysis is how is the
government defining the
speech. He stated these were
his own views... So how would
answering questions interfere
with the deliberative process
of the SEC?
SEC lawyer
Ladan Stewart: A speech is a
speech, it's on the SEC's
website. There is no tension.
Director Hinman consulted with
others in the SEC about the
speech. It was all
pre-decisional...
Judge Netburn: So
what was the decision made?
SEC lawyer: There doesn't have
to be a decision made. We
found another case, not in our
letter: it's Nacchio, 2009
Westlaw 211511, Dist of
Colorado, Jan 29, 2009.
[If it's an SEC case, how
could they not have "found"
it?]
Judge Netburn:
For what proposition are you
citing the Nacchio case? SEC
lawyer: That Mr. Hinman falls
under deliberative process
privilege. Judge Netburn:
Would the privilege be invoked
if Mr. Hinman were asked, Why
do YOU think xyz? SEC: Yes.
Ripple's
lawyer: Mr. Hinman was trying
to provide guidance -- Judge
Netburn: Why do you say that?
Ripple's lawyer: The SEC held
it out to Congress as such.
Then the agency points to the
speech, it shows the speech
was meant to provide guidance.
Judge
Netburn: But if the speech
reflects agency guidance,
isn't the process that led up
to it covered by the
deliberative process
privilege? Ripple's lawyer: We
want to establish, with the
deposition, if this WAS the
policy of the SEC.
Ripple's
lawyer: Mr. Hinman was never
at the apex of the agency. The
SEC is 4,200 employees. Mr.
Hinman's department was much
smaller. Between March 2018
and March 2019 he had a number
of communications giving
guidance. Ripple's lawyer: He
was being asked, Is it an
investment contract under
Howey. Mr. Hinman met with the
founder of the Ethereum
Foundation... And of
Consensus, a leading software
developer for Ether.
Ripple's lawyer:
We don't know who all the 3d
parties he met with are. We
want to ask him. Judge
Netburn: Mr. Rapawy, if you
were asking me to depose him
for a list of who he met with,
I'd direct you to his chief of
staff or deputy. You could get
his calendar
Ripple's
lawyer: It's going to be hotly
contested, we need everything
we can get. And even if the
speech were the decision, we
could still do discovery about
things after the speech. Let
us do the deposition, then
brief it afterward.
Ripple's lawyer:
In unique cases, you do
sometime get depositions of
senior officials, like in the
Judge Furman case, the
Secretary of
Commerce.... Martin
Flemenbaum for Christian
Larsen: We must be able to him
about his other public
remarks.
Judge Netburn: If
I allow the deposition to go
forward, it's Monday?
Flumenbaum: The Defendants are
prepared. SEC: We'd need time
to evaluate. [Meaning,
appeal?] SEC: They want to
depose him twice - he declines
to answer some, then they
bring the transcript to you
Judge
Netburn: In Nacchio, the
deposition in fact
happened... Defense: Mr.
Hinman met with Ether a week
before the speech. This is not
covered by the privilege. SEC
lawyer: If it goes forward,
we'll be instructing not to
answer the questions on
privileged info
Rapawy: We don't
agree to push this back. It
should be possible to avoid 2
depositions, if invocations of
privilege are reasonable.
Matthew Solomon for Bradley
Garlinghouse: My client will
be sitting for a deposition
during this discovery period.
No more delay
Judge Netburn:
The issues are complicated. I
am going to rule in part. I am
prepared to find Mr. Hinman
was a high ranking official.
He is entitled to the standard
in the Lederman case, 731 F.
3d 199.
Judge Netburn: I
find that this case is unique,
and that the amount in
controversy is substantial.
And the public's interest is
significant. In this case, Mr.
Hinman must sit for the
deposition. I am going to
authorize it.
Judge Netburn: It
seems to me to put it off for
a week and think about how the
privilege will apply is a good
idea. Let me know. SEC:
That makes sense to us. We
will meet and confer and get
back to the court. Ripple's
lawyer: Will confer
Judge Netburn:
Let me know by tomorrow
afternoon, if deposition is
Monday or a brief
postponement, you could bring
the issues of privilege to me.
I will wait to hear back.
On
June 14, Judge Netburn agreed
to sign and issue letters for
request for the individual
defendants, Bradley
Garlinghouse and Christian A.
Larsen, to iFinex, Bitforex,
Bitrue Singapore, Coinbene Ltd
Vanuatu, Coinone Co., Upbit
and others. Full request
letter on Patreon here.
Now on June 15,
the letters have been picked
up, and we learn that they
will be going to the
Central
Authorities of
the United
Kingdom of
Great Britain
and Northern
Ireland, the
Cayman
Islands, the
British Virgin
Islands, the
Hong Kong
Special
Administrative
Region of
China, the
Republic of
Singapore, the
Republic of
Seychelles,
the Republic
of Korea, and
the Republic
of Malta.
The
filing: "LETTERS
ROGATORY ISSUED on June 15,
2021, and picked up by Cleary
Gottlieb Steen & Hamilton
LLP and to be served in the
Central Authorities of the
United Kingdom of Great
Britain and Northern Ireland,
the Cayman Islands, the
British Virgin Islands, the
Hong Kong Special
Administrative Region of
China, the Republic of
Singapore, the Republic of
Seychelles, the Republic of
Korea, and the Republic of
Malta.(km)"
On June 2, the
SEC asked for a 60 day
extension of time for
discovery. Full 7-page letter
on Patreon here.
On June 4, Ripple
wrote to Judge Analisa Torres
that they oppose any extension
and will put in more paper
next week. Watch this site.
On Memorial Day
weekend, Judge Netburn
issued a 9-page order denying
the SEC's request, without
prejudice to it being renewed,
full order on Patreon here:
"OPINION & ORDER re: [165]
LETTER MOTION for Local Rule
37.2 Conference addressed to
Magistrate Judge Sarah Netburn
from Jorge G. Tenreiro dated
May 7, 2021, filed by
Securities and Exchange
Commission, [166] LETTER
MOTION for Local Rule 37.2
Conference addressed to
Magistrate Judge Sarah Netburn
from Jorge G. Tenreiro dated
May 7, 2021, filed by
Securities and Exchange
Commission. The SEC's motion
is DENIED. If, at some later
date, Ripple raises its good
faith beliefs or relies upon
its privileged communications
in support of its fair notice
defense, the Plaintiff may
renew its application to the
Court. Respectfully, the Clerk
of Court is directed to deny
the motions at ECF Nos. 165
and 166. (Signed by Magistrate
Judge Sarah Netburn on
5/30/2021)."
Inner City
Press will stay on this.
The case is
Securities and Exchange
Commission v. Ripple Labs Inc.
et al., 20-cv-10832 (Torres /
Netburn)
***
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