Empower Oversight, a nonprofit, nonpartisan educational organisation, has made public the U.S. Securities and Exchange Commission (SEC) emails revealing improper conduct by the agency employees in connection with the Ripple (XRP) lawsuit.
The organisation argued that the emails could prove that the SEC was selectively enforcing crypto-related laws. In addition, the SEC might have been favouring some cryptocurrencies over others.
The SEC ethics office cautioned former SEC official William Hinman about his direct financial interest in Simpson Thacher. Yet, despite these warnings, he continued to engage with the New York-based legal firm. He met with his partner at the firm, Josh Bonnie, at least three times and Ethereum co-founders and investors.
The documents show that the SEC ethics office cautioned former SEC official William Hinman that he had a direct financial interest in Simpson Thacher, yet Hinman continued to meet with the firm in spite of these warnings.
— Empower Oversight (@EMPOWR_us) April 8, 2022
The meeting took place soon before Hinman’s 2018 address, in which he announced that Ether is not deemed a security. The speech was historic for the crypto industry since it resulted in the sale of the first 60 million Ether to generate cash for the Ethereum Foundation.
“The latest documents provided by the SEC raise more questions than they answer. We will continue to press the SEC for more meaningful and more timely transparency on this issue,” said Jason Foster, Empower Oversight Founder and President.
At one point, Shira Minton, the SEC’s Ethics Counsel, advised Hinman to abstain from a group meeting with the law firm’s members due to financial conflict.
SEC’s opposition to the emails release
The almost 200-page emails were made public after Empower Oversight filed a Freedom of Information Act (FOIA) request in August 2021. The SEC denied the request, prompting the organisation to sue to force the SEC to comply with its FOIA requests.
The SEC’s attorneys objected to the directive, claiming that the emails included the ESC officials’ deliberations and were thus shielded from discovery.
Significant issues have been raised about whether Hinman fully revealed Simpson Thacher’s involvement in Ethereum to SEC ethics regulators. It is unknown if the legal firm would have permitted the meeting if it had been completely disclosed.
Sarah Netburn, the presiding judge, is likely to decide on the SEC’s move for reconsideration regarding the plaintiff’s internal documents.
However, legal experts say that Empowerment Oversight’s access to the SEC communications might jeopardise the agency’s chances of winning the lawsuit against Ripple.
On 22 December 2020, the SEC filed suit against Ripple Labs Inc. and its current and former CEOs, claiming that Ripple raised over $1.3 billion through an illegitimate initial public offering (IPO) of the unregistered security XRP.