There is evidence that a key SEC official knowingly had a conflict of interest during the initiation of Ripple lawsuit

An anti-corruption watchdog that tracks the US Securities and Exchange Commission’s (SEC) legal battle with Ripple says there is evidence that a key SEC official intentionally had a conflict of interest during the litigation process.

SEC official had conflict of interest in Ripple lawsuit

The SEC sued Ripple in December 2020, alleging that XRP was issued as an unregistered security.

In a press release, the nonprofit organization Empower Oversight said it received more than 200 email filings through a Freedom of Information Act request that sheds light on conflicts of interest in the SEC, specifically related to William Hinman, former Director of the SEC’s Corporate Finance Division.

According to the organization’s interpretation of the emails, SEC officials warned Hinman of a conflict of interest because of his relationship with Simpson Thacher.

Simpson Thacher is a law firm that promoted Ethereum (ETH) through an organization called the Enterprise Ethereum Alliance and became Hinman’s parent company after filing the lawsuit.

“SEC Ethics office cautioned former SEC official William Hinman that he had a direct financial interest in Simpson Thacher. Thus, he must recuse himself from any matters that would affect the firm. Additionally, the Ethics office explicitly told Hinman, per the documents, not to be in any contact with Simpson Thacher for any reason. However, Hinman met with Josh Bonnie, a partner at Simpson Thacher, at least three times after that warning.

Hinman also met with the co-founders and investors in Ethereum ahead of a market-moving speech in 2018 declaring the digital asset Ether to not be a security, despite Simpson Thacher’s participation in the Enterprise Ethereum Alliance, which is dedicated to promoting the commercial use of Ethereum. This raises questions about 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.”

One of the emails found in the documents reads,

“But Bill [Hinman], it occurs that you have a full financial conflict with your old firm, not just an impartiality one. Hence, you should not be having any meetings with your old firm. even group meetings.”

Empower Oversight filed a lawsuit against the SEC in December 2021, alleging a conflict of interest stemming from Hinman’s involvement with Simpson Thacher and the Enterprise Ethereum Alliance. The lawsuit states that Marc Berger, the leader of the SEC Enforcement Division and the lead initiator of the lawsuit against Ripple Labs, also left the SEC for Simpson Thacher.

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