The Securities and Exchange Commission has held increasing sway over cryptocurrency markets. Its influence has grown along with a series of lawsuits against crypto firms beginning in 2020.
However, a number of court decisions favorable to the defendants in the Ripple lawsuit have tested the limits of the commission’s power.
Now, John Deaton is calling the powerful government regulator’s ethics into question as well. The Rhode Island lawyer recently highlighted a revolving door at the SEC.
Conflict of Interests in Ripple Lawsuit?
According to Investopedia, “The term ‘revolving door’ refers to the movement of high-level employees from public-sector jobs to private-sector jobs and vice versa.”
In the revolving door thread from this week, John Deaton pointed out that former SEC Chair Jay Clayton was once a partner at Sullivan & Cromwell. That’s the law firm that blockchain company ConsenSys hired when it bought J.P. Morgan’s blockchain platform Quorum in 2020.
Drawing parallels to the Hinman case, Deaton argued that Ethereum and ConsenSys have received special treatment from the SEC, while the commission has unfairly targeted Ripple Labs. Ethereum cofounder Joseph Lubin founded ConsenSys in 2014.
Deaton said that if Ripple Labs had hired the legal firm where former SEC Chair Jay Clayton had worked, the Ripple lawsuit would not have happened on Clayton’s watch:
“Here’s a fact: if [Ripple’s CEO and chief legal officer] would’ve rushed to hire Sullivan & Cromwell to represent Ripple once they learned Clayton was appointed as [Chairman], Ripple would not have been sued on Clayton’s watch.”
As a result, Deaton argues the SEC is unfairly picking winners and losers in the cryptocurrency industry. Furthermore, Deaton bemoaned journalists who are meanwhile complacent about regulatory ethics. He called it “truly sad” that “respectable journalists” don’t view conflicts of interest at the SEC as worthy of reporting.
What’s truly sad is that in today’s world, these massive conflicts of interests and gross appearances of impropriety have become so accepted that good respectable journalists like @JoeSquawk @BeckyQuick @andrewrsorkin @davidfaber @BobPisani @MelissaLeeCNBC @carlquintanilla… https://t.co/4X2tLcMhdf
— John E Deaton (@JohnEDeaton1) November 29, 2023
Cardano Founder’s SEC Rant Hooks XRP Twitter
Deaton wasn’t the only one to vent at the SEC this week. Charles Hoskinson’s impassioned critique of what he considers unfair practices by the SEC caught the attention of X.com’s “XRP army.”
Digital Perspectives (155K X.com followers) founder Bradley Kimes told his followers that Hoskinson is “feeling the frustration that every” XRP holder has felt over the Ripple Lawsuit, which has been ongoing since 2020.
Deaton also responded to Hoskinson’s rant, saying,
“I don’t see how anyone could not objectively understand the frustration. U.S securities laws need to be coherent and consistently applied across all ecosystems.”
Marisa Coppel, senior counsel at the Blockchain Association, said in a recent interview with popular crypto podcast Thinking Crypto that she doesn’t expect the Ripple lawsuit to end in a settlement:
“It would be surprising if they could agree on a settlement. I think the SEC would have to really fall on their sword, you know, for that.”
The SEC seems eager to press the suit all the way to the Supreme Court. CEO Brad Garlinghouse says his company is prepared to take the case all the way to the high court.