By John E. Deaton, Founder and Host of CryptoLaw.
You would think that blatant government corruption and self-dealing was the stuff of a Hollywood movie, but when you peel back the layers of the Ripple case, examine its origins, and review key facts related to some of its central figures at the Securities and Exchange Commission, a larger story emerges that can’t be ignored.
Former Chairman Jay Clayton, ex-Corporation Finance Director William Hinman, and former Enforcement Director Marc Berger took very specific actions while they were in office, related to very specific cryptocurrencies. In parallel, they have very specific financial interests related to cryptocurrencies, which were benefited by those actions, while millions of retail holders of a specific cryptocurrency were directly harmed.
Those are the indisputable facts, and taken together they point very clearly to something very troubling behind the SEC’s filing of the Ripple case on Clayton’s last day in office. How can we look at these facts and just dismiss the idea of corrupt intent?
Here is what we know, in detail:
- Before joining the SEC, we know that both Clayton and Hinman earned massive fees to support Chinese tech giant Alibaba Group carry out its 2014 IPO on the New York Stock Exchange. Alibaba’s Alipay is the largest digital mobile payments platform in the world, and its New York IPO set the stage for China’s intended dominance in global digital payments.
- By 2016, Chinese-controlled bitcoin miners had moved to control 65% of the bitcoin network hash rate. Since bitcoin is a proof-of-work token, this gives China control of its network.
- On January 20, 2017, Jay Clayton was nominated as Chairman of the SEC by President Donald Trump. Despite widespread concerns regarding Clayton’s numerous conflicts of interest, he was ultimately confirmed and sworn in on May 4, 2017.
- On May 9, 2017, William Hinman was named the Director of Division of Corporation Finance at the SEC. Upon his appointment to the SEC, Hinman left his post at the law firm Simpson Thacher – which sits on the Enterprise Ethereum Alliance and represents cryptocurrency-related financial interests – but continued to receive millions in financial payments from the firm. In short, Hinman had a clear financial interest in any regulatory action by the SEC related to cryptocurrencies – while he was serving in a top SEC position! This was something one former SEC ethics lawyer said was “a little unsettling.” (A little?)
- In 2018, Clayton publicly declared bitcoin not a security, sending the price of bitcoin soaring.
- During a 2018 Yahoo Finance summit in San Francisco, Hinman declared that the Ethereum token, ether, is not a security. The price of ether skyrocketed.
- In 2019, Simpson Thacher led Chinese-based crypto mining company Canaan to their IPO. Canaan provides the technology used for mining bitcoin, and is publicly bullish on Bitcoin. Hinman was still at the SEC when this happened, and still collecting checks from Simpson Thacher.
- In early November 2020, then-Director of National Intelligence John Ratcliffe wrote Chairman Clayton to express his growing concerns over China’s dominance in crypto and the risk it poses for U.S. national security.
- On December 4, 2020, Hinman resigned from the SEC.
- On December 22, 2020 – Clayton’s last day in office – the SEC Enforcement division led by Berger filed its lawsuit against Ripple and its executives alleging that XRP sales over seven years were unregistered securities trades. The complaint indicates “all sales” were illegal, therefore ensnaring millions of retail XRP holders who have never heard of Ripple but traded the digital currency for years. The price of XRP plummeted.
- On January 12, 2021, Acting Enforcement Director Marc Berger announced his resignation from the SEC, departing the agency at the end of the month.
- On January 12, 2021, Bloomberg reported that Hinman would be returning to the law firm Simpson Thacher, which continues to sit on the Enterprise Ethereum Alliance. Government documents indicate Hinman received over $15 million in payments from Simpson Thacher over the four years he served at the SEC:
- As of March 2021, the People’s Bank of China (PBOC) had edged closer to the full-scale launch of their Digital Yuan, releasing millions of dollars of the digital currency in trials.
- On March 29, 2021, Bloomberg reported that Clayton had accepted a position at One River Asset Management, a digital asset hedge fund focused exclusively on bitcoin and ether.
- In its case against Ripple, SEC attorneys have been fighting tooth and nail not to adhere to the One River Asset Management subpoena, more than likely in an attempt to keep potentially incriminating evidence about Clayton’s compensation from coming to light.
- On April 15, 2021, Bloomberg reported that Berger was joining Hinman as a partner at Simpson Thacher.
Neither Clayton, nor Hinman, nor Berger, nor the SEC have disputed any of these facts or the chronology of how this all unfolded. Any objective reading clearly suggests that these three had and/or currently retain financial interests linked to the officials’ actions they took at the SEC.
Why haven’t these individuals, Simpson Thacher and One River been challenged to explain these facts?