Recent developments in the cryptocurrency regulatory landscape have brought to light allegations of potential conflicts of interest involving former officials of the U.S. Securities and Exchange Commission (SEC). Attorney John E. Deaton has raised concerns over the actions of former SEC Chairman Jay Clayton and former Director of Corporation Finance William Hinman, suggesting that their decisions while in office may have been influenced by personal and professional connections.
Two months prior to Clayton’s departure from the SEC, investment firm OneRiver made a significant investment in Bitcoin and Ethereum. Notably, following his tenure at the SEC, Clayton joined OneRiver, raising questions about the timing and nature of this transition. Additionally, Clayton’s law firm, Sullivan & Cromwell, represented ConsenSys and Ethereum co-founder Joseph Lubin. This firm played a key role in a deal where ConsenSys acquired JPMorgan’s Quorum, which was developing the JPMCoin.
Deaton added that during Hinman’s deposition, he admitted to initiating contact with Lubin to discuss Ethereum. Although he could not recall if Clayton had suggested this outreach, Hinman confirmed that Clayton inquired more than once about his meetings with Ethereum representatives. This has led to speculation about Clayton’s interest in these discussions.
Furthermore, Clayton had previously sworn under oath that he would recuse himself from voting on enforcement actions against clients of Sullivan & Cromwell. However, he later voted for an enforcement action against a major competitor of his firm’s client. According to Deaton, this action contradicts his earlier commitment and raises questions about his impartiality.
Deaton also highlighted that Lubin’s hiring of Sullivan & Cromwell partners for key positions at ConsenSys was a strategic move. This decision potentially influenced Clayton’s ability to vote on enforcement actions against ConsenSys, the Ethereum Foundation, or Lubin himself. As Chairman, Clayton had significant influence over SEC policy and agenda-setting, further complicating the perception of his actions.
These revelations have sparked debate within the cryptocurrency community. This isn’t the first time the regulator has been under fire. Ripple CEO Brad Garlinghouse has previously criticized the SEC’s approach, suggesting that the agency was unfairly favoring certain cryptocurrencies. Garlinghouse accused the SEC of losing sight of its mission to protect investors, questioning whom the agency is actually protecting in its regulatory actions.
