The US Security and Exchange Commission’s (SEC) Office of Inspector General (OIG) is currently conducting an investigation into cryptocurrency-related financial conflicts of interest. Empower Oversight, an accountability group, disclosed on Feb. 15 that the SEC’s division is in the final stages of completing this inquiry. The investigation revolves around the failures of the SEC’s Ethics Office and a former official, William Hinman.
Controversial Speech and Alleged Favoritism
One of the focal points of this investigation is William Hinman’s controversial speech, where he claimed that certain digital assets, including Ethereum, were not subject to SEC regulations as securities. Critics within the Ripple XRP community argue that this speech unfairly favored Ethereum, potentially giving it an advantage over other digital assets in the market.
Empower Oversight presented evidence indicating that key figures from Ethereum, such as co-founders Joseph Lubin and Vitalik Buterin, were involved in drafting Hinman’s speech. This raises concerns about potential conflicts of interest and biased decision-making.
The accountability group also accuses Hinman of “blatantly disregarding” instructions not to meet with specific individuals while working at the SEC. One notable individual mentioned is his former employer, Simpson Thacher, a member of the Ethereum Enterprise Alliance (EEA). Hinman rejoined Simpson Thacher as a partner shortly after leaving the SEC in December 2020.
The significance of this alleged disregard for instructions is magnified by the fact that the SEC filed a lawsuit against Ripple, alleging that XRP was an unregistered security, in the same month that Hinman returned to Simpson Thacher. The timing suggests a potential conflict of interest and raises questions about the integrity of the SEC’s actions.
Empower Oversight has expressed its concerns regarding the lack of transparency from the SEC and has threatened to file a lawsuit if the regulator fails to provide information regarding its investigations by Feb. 23. The accountability group filed a Freedom of Information Act (FOIA) in May 2023 but has not received any information about the case from the SEC since then.
However, a silver lining has emerged from this situation. Empower Oversight discovered that the SEC’s Office of Inspector General is actively conducting an inquiry, which is nearing completion. This revelation sheds light on the reasons behind the SEC’s stonewalling and provides hope that transparency and accountability will prevail.
The ongoing investigation by the SEC’s Office of Inspector General into cryptocurrency-related financial conflicts of interest shines a spotlight on the failures of the SEC’s Ethics Office and raises concerns about potential favoritism and unlawful meetings. Empower Oversight aims to hold the regulator accountable and ensure transparency in its investigations. This case serves as a reminder of the importance of maintaining integrity and fair decision-making in the cryptocurrency industry.