Last week, a whistleblower Empower Oversight released more than 200 emails between current and former SEC employees. It revealed conflicts of interest associated with how the agency selected enforcement actions against digital asset companies, especially the SEC’s decision not to Ethereum the same as Ripple’s XRP.
Now, a judge has ruled that the SEC cannot edit or clarify the contents for the upcoming Ripple Labs trial. Experts say the emails could show that the regulator acted inconsistently by accusing Ripple Labs of securities violations for issuing the XRP token after ruling that Ethereum’s Ether was not a security.
The emails are from Shira Pavis Minton, the designated agency ethics official at SEC. He warns William Hinman, the former director of SEC’s division of corporate finance from May 2017 to December 2020, not to engage in any SEC matters that could impact Simpson Thacher, a law firm that is with the Enterprise Ethereum Alliance. Minton in the emails advises Hinman not to meet anyone from Simpson Thacher.
Despite the cautionary emails, Empower Oversight says Hinman met with Josh Bonnie, who is a partner at the law firm. It should be noted that the former SEC director met with the co-founders and investors in Ethereum just before declaring the cryptocurrency a token, and not a security in 2018. The whistleblower highlighted that this had a positive impact on Ethereum’s price and potentially benefitted Simpson Thacher. Empower Oversight says this brings to the fore whether Hinman fully disclosed Simpson Thacher’s role in Ethereum to SEC ethics officials and whether they would have approved his meetings and speech.
Experts say if Ripple Labs can prove that SEC leaders had an interest in promoting and protecting Ethereum over other similar tokens, it could be a win for XRP. Michael Fasanello, chief compliance officer of LVL, said this type of conflict of interest within the regulator is highly volatile in terms of undermining the public trust in government administration. He said this will not affect only the Ripple case, but other cases involving digital assets as well.