The SEC has been accused of corruption in its dealings with the crypto industry, especially regarding its relationship with XRP.
The ongoing legal tussle between the Securities and Exchange Commission (SEC) and crypto payment protocol Ripple has taken a new turn. The bone of contention is that the SEC is biased toward Ethereum (ETH) over Ripple’s native token XRP.
In fact, John E Deaton, founder of CryptoLaw, and Managing Partner of the Deaton Law Firm, has stated some interesting findings alleging corruption in the SEC. According to Deaton, former SEC chairperson Jay Clayton nursed a hidden agenda to promote ETH at the expense of XRP in 2018. Clayton met with the head of leading VC firm Andreessen Horowitz, asking him to arrange a meeting. The meeting would feature some of the brightest crypto industry representatives to deliberate on proper regulation of the industry.
However, as it turned out, only representatives from ETH were duly represented at the meeting. XRP (which at the time was the second-largest crypto) and other digital currency representatives seemingly did not get invites. Deaton alleges that this lent further credence to the fact that the SEC had an internal conflict of interest. In addition, the regulatory agency snubbing the then-more prominent XRP, underscored how badly Clayton was looking to support ETH just to “kill” XRP.
The SEC also declared some digital assets, including XRP, as falling under its securities category, while appointing others like Ethereum as non-securities.
Government Watchdog Sues SEC Over Conflict of Interest Regarding XRP, ETH, Other Crypto
Earlier in the year, government watchdog Empower Oversight looked to investigate the SEC’s motivations behind several accusations. Empower Oversight requested internal documents from the regulatory agency on crypto, revealing the alleged conflict of interest.
In light of this, Empower Oversight decided to take legal action against the SEC. Furthermore, Empower Oversight wants the regulatory agency to comply with the Freedom of Information Act (FOIA) by revealing internal communications. This would include correspondence between senior officials and their current and former employers over crypto assets.
Empower Oversight’s suit includes multiple allegations, including bribery and attempted price manipulation of crypto within the Commission. Part of the document read:
“Former senior SEC official William Hinman received millions of dollars in compensation from his former employer, Simpson Thacher, while helping guide the SEC’s regulation of cryptocurrencies. 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.”
Furthermore, Empower Oversight alleged that the SEC sued Ripple shortly after declaring XRP a security, causing its value to slide 25%. In addition, according to the regulatory agency, Ripple sold XRP even though it was unregistered. However, Ripple countered by accusing the SEC of a double standard. The firm stated that it is not much different from other non-registered cryptos.
Notwithstanding, Ripple CEO Brad Garlinghouse now says that he expects the ongoing legal skirmish with the SEC to conclude next year. Speaking to CNBC, the CEO said the judge is now asking “good questions”. Garlinghouse believes that the judge now understands that the suit is not just about Ripple.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
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