A Freedom of Information Act (FOIA) request by a whistleblower has revealed former Securities and Exchange Commission (SEC) director William Hinman was receiving millions of dollars in retirement benefits from a pro-Ethereum law firm during his tenure.
Hinman worked as the SEC’s corporate finance division chief from mid-2017 to late-2020. In June 2018, Hinman famously stated, “The Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions,” (our emphasis).
However, information obtained by Empower Oversight Whistleblowers & Research shows Hinman was receiving substantial retirement benefits from his previous employer at the time of his statement. Law firm Simpson Thatcher & Bartlett is a member of the Enterprise Ethereum Alliance, a group that supports Ethereum projects. Hinman returned to the entity after his time at the SEC, serving as a senior advisor.
SEC officials rarely comment on specific crypto projects, which made Hinman’s 2018 speech a rare indication of approval. His words made headlines globally; innumerable academic papers and even court filings cited his non-security classification of Ethereum.
Empower Oversight founder Jason Foster told reporters at Law360 that a full investigation and report regarding Hinman’s conflicts of interest “could increase transparency and enhance public trust by recommending meaningful improvements to the ethics policies and procedures at the SEC.”
Hinman warned by SEC of conflicting Ethereum interest
The report shows the SEC ethics office cautioned Hinman to avoid any matters that might affect Simpson Thatcher while he still had financial interest in the law firm.
- SEC ethics official Shira Pavis Minton personally warned Hinman to avoid any communication with the firm in an email exchange.
- Minton also asked about any financial ties between the entity and Hinman.
- To qualify for tax exemptions, Hinman said he would divest once he started his job at the SEC.
Empower Oversight claims that Hinman continued to meet with Simpson Thatcher during his tenure, despite the SEC ethics office’s warnings.
It further alleges that Hinman contributed to the public perception that the SEC did not equally apply clear rules when evaluating cryptocurrencies. It says that the ethics office should put more robust oversight in place to ensure that SEC employees do not have conflicts of interest.
No SEC lawsuit against Ethereum
In December 2021, Empower Oversight filed a lawsuit against the SEC to force it to respond to FOIA requests. Empower Oversight is seeking information on additional alleged conflicts of interest, related to former SEC chairman Jay Clayton and acting enforcement chief Marc Berger.
The SEC has not pursued any action against Ethereum. However, in December 2020, it filed a lawsuit alleging that Ethereum competitor Ripple and its founders sold $1.3 billion in unregistered securities called XRP. Jay Clayton signed off on that lawsuit just before resigning as chairman.
Ripple CEO Bradly Garlinghouse accused Clayton of “picking winners” and the company’s legal defense team predictably latched onto the documents obtained by Empower Oversight through the FOIA request. They say it demonstrates a clear conflict of interest. The SEC countered by attempting to shield many of the Hinman-related documents that Ripple requested.