Ripple v. SEC_ Attorney Hogan on the SEC's BIG BLUNDER. That's all.

Welcome to Crypto Tech Weekly and today we have Ripple lawyer Jeremy Hogan. Thank you for having me. I'm actually not Ripple's lawyer. I just talk about it on YouTube. Oh, okay. I'm sorry. I'm at the XRP lawyer. I apologize. So listen, we have so many questions for you. The first is, where did you meet your very attractive wife? Well, I mean, Tin Vu and I, we met in law school, the very first day of law school, actually. And what did you like most about her? Her eyes, her lips? Well, I mean, I thought she was very beautiful, of course, and just in general, you know. I mean, you know, we manage our law firm together. Yeah, yeah. About your law firm. What's it like to work with Tin Vu? Is she domineering type of boss or more meek and passive? She's very nice. Wait a minute. What, what website are you from again? Crypto Tech. Tell me quick. What's your favorite interoperability token? Interrupt the what? Oh man, another creeper. Get out of here. Welcome back to Legal Briefs. And have you ever had a feeling that you were sucked into a situation and told it was one thing, but then had it switched up on you and it was completely different? Well, that is the wild and crazy turn the Ripple versus SEC lawsuit just took. And we are, of course, going to talk about that. And more importantly, what is the legal significance in terms of the case itself? It's no bueno for the SEC, just a little foreshadowing. And I'm going to tell you why. And I was hoping to take a jump into the legal memos that I expected to be unsealed today. But as of right now, they are still sealed. But on the SEC side, the judge told them that they have 63 emails that are going to be unsealed and that the judge needs to have them turn them over. So we have that being unsealed. We have Ripple's documents being unsealed. And in this case, there's so much unsealing going on right now, it almost seems like they should have their own OnlyFans account. Props to the Late Night Grind YouTube channel that cracked me up. But as of right now, everything is still sealed. OK, let's get to it and start with the SEC's motion for reconsideration, which I think will go down in legal history books. For what, I don't know. But as we say in court, when a pleading is like this, it's cray cray. As you may know, for the last 10 months or so, the SEC and Ripple have been fighting over about 63 documents, mostly emails, related to SEC Director Hinman's infamous Ether might have been a security in the past, but is no longer being sold as a security now. Speech. The SEC has argued from the very beginning that Mr. Hinman's speech was just his own personal viewpoint on things and not any official position of the SEC. In fact, Mr. Hinman submitted an affidavit under oath to that effect, in which he said, quote, The speech was intended to express my own personal views. During my preparation of the speech, I discussed my thoughts with other commission employees as part of the commission's ongoing deliberations about whether offers and sales of Ether constituted securities transactions. To the best of my knowledge, the commission had not taken at that time and still has not taken any position or expressed a view as to whether offers and sales of Ether constituted offers and sales of securities. Close quote. Very clear, Mr. Hinman. And why is his statement that this speech was just his opinion very important? Now for that analysis, let's go back in time to this young dude who did a video back in August of last year. Because we've seen the judge during the very first hearing in the case and in the second hearing, which I think was April, the April 6 hearing, show a lot of interest in what Mr. Hinman said about Ether. And I would argue that the SEC's position on Ether is not only important to the fair notice defense, but also to the underlying is XRP a security issue because the court seems open to comparing the two tokens and basing part of its decision on that comparison, which I think the SEC has caught on to. And that is why it is backtracked and said that Hinman's speech was only his personal opinion and not an official position of the SEC that Ether is not a security. Makes sense. And remind me to never wear that shirt again. So being nervous about Ripple being able to argue the factors contained in Hinman's speech, what the SEC eventually decided to do was weaken its position on whether it had to disclose the emails related to the speech in order to be able to make the argument that the court shouldn't take the speech into account at all because it was just his personal opinion and shouldn't have been relied on by Ripple and also that the court should not rely on it. I called this play by the SEC its Queen's Gambit because I just watched the series. It sacrificed the documents in order to save it from having to argue about the differences between Ether and XRP and otherwise having to address the Hinman speech. Fair enough. Now that actually made a lot of sense to me because it was like the SEC was sacrificing a pawn in order to save a bishop. And then as expected, because Hinman's speech was just his personal opinion, this is what the judge stated in her eventual order. Quote, The question of whether Hinman's speech reflected his own opinion or the agency's is settled. Period. Close quote. Very definitive. Now that's from page 14 of her order. And then she goes on to order that the emails related to the speech be given to Ripple. And then what happened was that the SEC just refused and refused to comply leading up to two days ago in which the SEC filed its motion for reconsideration of this order and made what I think might be the first big blunder of this litigation. That's right. I think that this motion is a mistake with a capital M. And yes, I'm commenting from the sidelines, but I'm also commenting from my experience because I have screwed up more things in litigation than most attorneys. So I'm somewhat experienced in this area. And here's what has happened and why. In litigation, you have to have your strategy, your theory of the case, or the theory of the issue that you were arguing, and you have to stick with it. In a DUI defense case, for example, your legal position might be that your guy had been drinking, but was not impaired. Now, if that is your position, you get your client straight on it, and you do not waiver. Now, if he gets up on the stand and says, well, now that I think about it, I don't even really think I drank that night. You are screwed. Okay. In a murder case, if your position is that your client killed the other guy in self-defense, you stay with that and do not waiver. Never, ever change your theory of the case or issue midstream unless you absolutely 1,000% have to. Never, ever do it. Never, ever. So here's what the SEC did, and it's in its motion for reconsideration. Let's take a look. It's right there at the bottom of page one, right at the beginning of the motion. And it says, The speech itself, and the many drafts and comments by SEC staff across different SEC divisions and offices, deliberating the agency's approach to the regulation of digital assets, show that Director Himan and other SEC staff used the speech to provide public guidance as to how CorpFin, Corporation Finance Division, would apply the federal securities laws to offers and sales of digital assets, including Ether. Indeed, SEC regulations provide that Director Himan's public statements could be relied upon as representing the view of CorpFin, the division he led. Close quote. Yes, the entire argument completely backtracks on what the SEC has been saying about this speech for almost like the last year. And what does that mean from a legal strategy standpoint? Look at what the SEC has just done. It's not good because it opens up the possibility that the SEC could lose both its pond and its bishop. Let me explain. First, the judge has already made a very strong determination that as far as she is concerned, the speech was Himan's personal opinion. There was no doubt about that in her order. That is actually what the SEC wanted. It got basically what it wanted there. Now, in this motion for reconsideration, it has given her more very similar documents to review and changed its position on the speech 180 degrees. Now, is that going to change the judge's mind on whether the emails are discoverable? I don't think so. I mean, it's possible, but I don't think so because she's already made a determination based on Himan's affidavit. Just because a lawyer says that Himan's affidavit is not correct, doesn't make it so. It's meaningless. Nothing a lawyer ever says is evidence. Only what Himan said under oath is evidence. Now, second, and much, much, much, much worse, the SEC has now put its bishop at risk. And that's because it's trying to make a fine distinction that most likely isn't going to hold up. And that distinction may very well put the Himan speech back in play as official guidance when Judge Torres gets the case for final summary judgment. The SEC is trying to distinguish the Department of Corporate Finance, a department within the SEC, from the SEC itself. Now, what's the problem with that strategy? Here's the structure of the SEC. There's the Division of Corporate Finance at the bottom. Does the division statement bind the SEC? Well, the answer to that is absolutely because a company, a commission, an organization are of course made up of different parts. But the SEC is the organization, the umbrella under which all the parts fall. When Tesla's head of the Department of Finance says it will finance Tesla cars at 0% interest, is that Tesla talking or just that department? Of course it's Tesla talking. And the SEC can try to argue that fine line to the judge that the division is somehow separate from the SEC if it wants to try. But my question is, why even put yourself in that position? And this is especially true because the fair notice defense and even the Section 5 violation to an extent are objective tests. And the question is what a reasonable market participant would have taken away from the Hinman speech. And no reasonable market participant would ever have dreamt that when the head of the SEC Division of Corporate Finance, Mr. Hinman, gave the Ethereum speech, no one would have thought, well, I guess that's just binding on his own division within the SEC and not on the other three divisions or on the SEC in general. That argument is just not tenable and no one's gonna buy it. I have an idea for them though. Maybe the SEC should get my buddy on Twitter, Stephan Huber, to argue the motion for them because he can apparently explain the SEC's position in 140 characters. The Hinman speech was not the SEC's position, but the personal opinion of Hinman, who didn't represent the SEC, but the SEC Division of Corporate Finance, which represents the SEC, but doesn't represent the SEC because it isn't the SEC. Yeah, that'll work in court. Which is all to say that the SEC has put itself in a position where it may very well lose both the discovery battle and the big battle related to the use of the Hinman speech as to the fair notice defense and the Section 5 violation. Blood everywhere with this move. And why would the SEC do this, you might be thinking. And of course, I don't know, but that won't stop me from speculating. First, it might be that the SEC is trying to get away with one, by which I mean something shady and maybe even unethical. Because of course, discovery is ending in 10 days. All of these depositions have been taken with the understanding that Hinman's speech was his personal opinion. And now the SEC completely reverses its position at this point in time. Now, do you think that Ripple will get to redepose 15 deponents now in the light of this shift in argument? No, that's not going to happen. So changing strategy at this point in time doesn't quite smell right. Now, has the litigation become that dirty? I mean, possibly. I mean, look at the declaration of Melinda Hardy, an attorney at the SEC, which was attached to the motion for reconsideration. It's just basically an attorney with the SEC making five pages of argument for the motion, backdooring in five pages of legal argument and extending the SEC's motion from a 10-page limit to 15. I've never done that before. It's below me. And the second possibility for what's going on, other than maybe some kind of dirty poker, well, I can't really think of one. That's awkward. In any case, if the judge in her final order on summary judgment ends up comparing Ether to XRP or talking about how the Hinman speech created confusion in the marketplace or otherwise brings in the Hinman speech, finding that Ripple did not sell XRP as a security, remember the 17th of February, 2022, as the date the SEC might've played Bobby Fischer's famous madness move, Bishop to H2. And finally, I was excited to discuss the legal memos that I was expecting to be unsealed today, but just as we were about to begin shooting, they had not been unsealed yet, which just means that the judge's clerk hadn't gotten around to it. They're very busy, I'm sure. But I do want to leave you with something uplifting and hopeful, and I want to recognize attorney James Filan. He's on Twitter as at Filan Law. Go check him out. And he doesn't like too much of the spotlight, but he knew I would be doing a video later today. And look what he did for me. He actually called the clerk of court in regard to whether the docs had been unsealed and messaged me on Twitter to let me know. That might be the most thoughtful, kind thing another lawyer has ever done for me. Be like Jim, kids. Be like Jim. What's this? A bill from Filan Law? One hour for calls to the clerk and 0.5 for email for Hogan? $589? Filan!