The Call for Transparency
Empower Oversight, a nonprofit organization dedicated to enhancing government accountability, has issued a strong appeal to Congress. They demand the release of an inspector general’s report from the Securities and Exchange Commission (SEC) regarding the actions of former chairman Jay Clayton. This request is rooted in concerns about potential conflicts of interest involving William Hinman, the director of the SEC’s Division of Corporation Finance from 2017 to 2020.
Empower Oversight has uncovered documents that suggest Hinman may have breached ethics regulations related to conflicts of interest. These findings were submitted to the SEC’s Office of Inspector General in May 2022. In February 2024, the inspector general announced that the investigation was nearing completion. The anticipated report could provide crucial insights into these allegations before Clayton’s confirmation as U.S. Attorney for the Southern District of New York.
Hinman’s 2018 Ethereum Speech: A Controversial Standpoint
In a widely-discussed 2018 speech, William Hinman declared that Ethereum’s digital token, Ether, did not qualify as a security. This assertion led to a significant increase in Ether’s market value, raising questions about Hinman’s potential financial conflicts of interest. His statement, “Based on my understanding of the present state of Ether, the Ethereum network, and its decentralized structure, current offers and sales of Ether are not securities transactions,” has been scrutinized for its implications.
Outside organizations, like Consumer Action for a Strong Economy (CASE), continue to pressure the SEC for the report’s release. Pro-XRP attorney John Deaton emphasized the need for transparency, urging SEC Chair Gary Gensler to release the report. He stressed that moving forward requires complete transparency, calling on other SEC members to advocate for the report’s publication.
XRP vs SEC: A Legal Battle Unfolds
The controversy also envelops a lawsuit initiated on December 22, 2020, as the Trump administration neared its end. Jay Clayton and William Hinman launched legal action against Ripple Labs, its co-founder Chris Larsen, and its current CEO Brad Garlinghouse. The lawsuit accused them of selling $1.3 billion in XRP cryptocurrency as unregistered securities.
Tristan Leavitt, in a detailed 22-page letter, shared SEC commissioner Joseph Grundfest’s concerns about the SEC’s actions against XRP. Grundfest highlighted a lack of substantial differentiation between the operations of Ether and XRP regarding federal securities laws. He argued that imposing securities law obligations on XRP while exempting Ether challenged the fundamental fairness of the Commission’s discretion. Grundfest contended that both cryptocurrencies should undergo similar treatment under the law.
