SEC sued by Empower Oversight over Freedom of Information Act

SEC sued by Empower Oversight over Freedom of Information Act

Empower Oversight, a watchdog agency, is suing the Securities and Exchange Commission of the United States (SEC). This is in response to Freedom of Information Act (FOIA) requests made by the agency with the SEC. According to the lawsuit, the sought information would allow Empower to determine whether or not there were many conflicts of interest involving crypto. Notably with a former director of the SEC’s Corporation Finance Division – William Hinman – and former SEC Chair Jay Clayton. 

Clayton and Hinman both left the SEC after that, with Hinman joining Simpson Thacher & Bartlett. He is a senior adviser in his current post. Clayton, on the other hand, has joined Sullivan & Cromwell as a senior policy consultant. From May 2017 to December 2020, William Hinman was the Director of the SEC’s Division of Corporate Finance. While working for the SEC, Hinman allegedly continued to earn millions of dollars from Simpson Thacher.

Hinman stated in a 2018 Yahoo Finance All Markets Summit speech that the Ethereum network and its decentralised structure, current offers and sales of Ether are not securities transactions. Since then, the value of Ether rose significantly. 

“After his declaration, Ether’s value rose significantly. That same month, the SEC filed a lawsuit against one of Ethereum’s rivals, Ripple, alleging that its XRP cryptocurrency was a security, such that the offering and sales of XRP violated federal securities law.”

Clayton has also been called out for conflict of interest by the whistleblowing firm. After leaving the SEC, he joined One River Asset Management, a cryptocurrency hedge fund that only invests in Bitcoin and Ethereum. He then stated that Bitcoin is not a security.

Empower has earlier also called out the SEC. Empower has sent two litigation requests to the regulatory body. First, on January 28, 2022, Empower Oversight filed a FOIA request requesting the processing notes from the SEC’s handling of an earlier FOIA request. The second filing was on December 15, 2022. Empower Oversight filed a FOIA request for numerous records and conversations. This was for examining potential conflicts of interest linked to the SEC’s cryptocurrency enforcement actions. In both cases, the SEC has failed to meet its statutory requirements.