A non-profit dedicated to government oversight is taking legal action against the U.S. Securities and Exchange Commission (SEC), alleging conflicts of interest in its handling of the crypto space.
Empower Oversight is suing the SEC to compel the regulator to comply with the Freedom of Information Act (FOIA) and reveal communications between its senior officials and their current and former employers regarding crypto assets.
The watchdog’s lawsuit alleges that SEC officials were subject to conflicts of interest by declaring digital assets like XRP as securities while appointing others like Ethereum (ETH) as non-securities.
Empower Oversight’s suit highlights how former top SEC executive William Hinman allegedly received substantial sums of money from a law firm connected to Enterprise Ethereum Alliance during his time at the SEC.
“Hinman reportedly continued to receive millions of dollars from Simpson Thacher while at the SEC. Simpson Thacher is a member of the Enterprise Ethereum Alliance, an industry organization aiming to ‘drive the use of Enterprise Ethereum.’
In a June 2018 speech in his official capacity as an SEC official, Hinman declared that the Ethereum cryptocurrency, Ether, was not a security. After his declaration, Ether’s value rose significantly. After departing the SEC in late 2020, Hinman rejoined Simpson Thacher as a partner.”
The suit also says that Marc Berger, leader of the SEC Enforcement Division and the one who brought the lawsuit against Ripple Labs, also left the SEC for the same law firm. Ripple Labs was sued by the SEC in December of 2020 for allegedly issuing XRP as an unregistered security.
In addition, the watchdog brings up how SEC Chairman Jay Clayton publicly declared that Bitcoin (BTC) was not a security, causing its price to rise. According to court documents, Clayton then left the SEC to join One River Asset Management, a crypto hedge fund that deals exclusively with Bitcoin and Ethereum.
According to Empower Oversight, the SEC has failed to comply with six of their eight FOIA requests. In the two they did respond to, the SEC claimed they had no records of the information.
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