Whistleblower group Empower Oversight has released details of emails received in a freedom of information request related to the ongoing SEC vs. Ripple lawsuit.
Among the 200 pages or so, they say there is evidence that former SEC Director William Hinman had a conflict of interest while initiating legal proceedings against Ripple.
The point of contention centers around Hinman’s involvement with the Ethereum Enterprise Alliance via New York-based legal firm Simpson Thacher. This was originally reported by CryptoSlate in April 2021.
However, things take a more ominous spin this time as the emails reveal damning information not known last year.
Doubts on the legitimacy of the Ripple lawsuit linger
The SEC initiated proceedings against Ripple in December 2020 on the charge of selling unregistered securities in its native XRP token.
A key defense point lies in XRP’s equivalency to Bitcoin and Ethereum. In June 2018, Hinman gave a speech in which he ruled that Bitcoin and Ethereum are not securities. Ripple’s legal team wishes to know on what basis XRP was singled out as not equivalent.
Tied with this is the no notice defence, which argues that Ripple had received no notice that XRP was not equivalent. The firm, therefore, assumed they were conducting business within the remit of applicable securities laws.
Last year, it was revealed that Hinman receives a $1.6 million/yr pension from Simpson Thacher. What’s more, this money was paid while he was a serving SEC Director (at the time of the June 2018 speech).
As Simpson Thacher are members of the Ethereum Enterprise Alliance, this casts doubt on Ethereum’s “not a security” status.
Hinman is accused of knowingly breaking ethical guidelines
While the above is old news, Empower Oversight reveals that Shira Minton, of the Ethics Counsel at the SEC, had warned Hinman about his relationship with Simpson Thacher. In April 2017, Minton advised Hinman to exclude himself from matters relating to his former employer.
Empower Oversight alleges that Hinman ignored Minton to meet a partner at Simpson Thacher on at least three occasions after the email was sent. It’s also claimed that Hinman had met with Ethereum co-founders and investors before his now-infamous June 2018 speech, in which he said Ethereum is not a security.
“This raises questions as to whether Hinman fully disclosed Simpson Thacher’s role in Ethereum from SEC ethics officials and whether they would have approved the meetings or his speech if he had.”
In isolation, these allegations have no direct impact on the Ripple case. Instead, what they do is call into question the credibility of the SEC. In that, an agency that dictates lawful practice must lead by example.
What’s more, if the SEC had knowingly overlooked Hinman’s behavior, what does that say about the institutional culture at the SEC?