When did former SEC employees have conflicts of interest related to crypto?
Empower Oversight, an agency that monitors the SEC, has filed a lawsuit against the SEC in order to get the SEC’s attention on Freedom of Information Act Requests the agency had submitted.
According to the lawsuit, the requested records will allow Empower to see whether or not there were multiple conflicts of interest that were crypto-related, specifically with a former director of the SEC’s Corporation Finance Division – William Hinman – and former SEC Chair Jay Clayton.
Both Clayton and Hinman have since left the SEC, with Hinman joining Simpson Thacher & Bartlett as a senior adviser and Clayton joining Sullivan & Cromwell as a senior policy adviser.
In the lawsuit, Hinman is alleged to have received a retirement from Simpson Thacher when he was at SEC. This allegation links back to an article in 2021 Insider. Enterprise Ethereum Alliance was founded by the law firm while Hinman was working at SEC.
Hinman stated that in a 2018 speech at the Yahoo Finance All Markets Summit, “the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions.”
“After his declaration, Ether’s value rose significantly,” The lawsuit says. “That same month, the SEC filed a lawsuit against one of Ethereum’s rivals, Ripple, alleging that its XRP cryptocurrency was a security, such that the offering and sales of XRP violated federal securities law.”
Ripple was provided with confidential documents relating to this speech in October last year.
In relation to potential conflicts of interest, the non-profit whistleblower agency filed additional FOIA requests. It released 200 emails in April last year that were centered on the correspondence between Hinman, SEC staff and other SEC employees.
Hinman’s not the only ex-SEC official who has alleged conflict of interests.
Empower mentions Clayton as well, the former SEC president who led from 2017 through 2020.
“As another example, former SEC Chairman Jay Clayton publicly stated while at the SEC that Bitcoin was not a security,” The state of Washington is one example. “Shortly after leaving the SEC, Clayton joined One River Asset Management, a cryptocurrency hedge fund that focuses exclusively on Bitcoin and Ether.”
Clayton, who left the SEC in 2013, told Blockworks he had no intention of getting involved with companies that deal with digital assets after his departure.
It is not the very first time Empower has sued the SEC over FOIA. The legal document states that “Empower Oversight filed a complaint in the Eastern District of Virginia” The year 2021 is December.
“The SEC’s failure to provide any transparency on this issue is making a bad situation look even worse. We’re approaching two years since Empower Oversight made its initial FOIA request, and a year and a half since our first lawsuit. Yet the SEC has consistently stonewalled any attempts to shed light on these clear conflicts of interest at the agency,” Tristan Leavitt said that in a press release.
Empower, the SEC is conducting “legally sufficient searches” Empower has been awarded attorney fees for its FOIA requests. “costs incurred in this action.”
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