A recent lawsuit filed by Empower Oversight, a watchdog agency, against the Securities and Exchange Commission (SEC) raises questions about whether former SEC officials had crypto-related conflicts of interest during their tenure at the commission. The lawsuit stems from the SEC’s failure to comply with Freedom of Information Act (FOIA) requests filed by Empower Oversight.
The records sought by the watchdog agency mainly revolve around former SEC Corporation Finance Division Director William Hinman and former SEC Chair Jay Clayton. Both have since left the SEC and joined prestigious law firms as senior advisers.
The lawsuit claims that Hinman received a pension from Simpson Thacher while serving at the SEC, a law firm that was a member of the Enterprise Ethereum Alliance at the time. In 2018, Hinman made a declaration at a Yahoo Finance All Markets Summit stating that offers and sales of Ether were not securities transactions. This announcement significantly affected Ether’s value, and the same month the SEC filed a lawsuit against Ripple, one of Ethereum’s rivals, alleging that its XRP cryptocurrency was a security.
The case with Ripple has been ongoing, and documents related to Hinman’s speech were confidentially released to Ripple last year. Empower Oversight has filed other FOIA requests related to potential conflicts of interest, releasing over 200 emails in 2022 that focused on correspondence between Hinman and SEC personnel.
Former SEC Chair Jay Clayton is also named in the lawsuit, as he stated publicly while at the SEC that Bitcoin was not a security. After his SEC tenure, Clayton joined One River Asset Management, a cryptocurrency hedge fund focusing exclusively on Bitcoin and Ether.
The lawsuit, filed in the Eastern District of Virginia in December 2021, is not the first time Empower Oversight has taken the SEC to court over FOIA requests. The watchdog agency is seeking the SEC’s compliance with “legally sufficient searches” to fulfill the FOIA requests and award attorney fees and costs incurred in the case.
Empower Oversight President Tristan Leavitt expressed disappointment in the SEC’s lack of transparency on the issue, saying, “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.” The dispute highlights the complexity of addressing potential ethical concerns involving blockchain and cryptocurrency within regulatory bodies, making it even more crucial for authorities to remain diligent and transparent in their actions.
Source: Blockworks
