SEC Controversy: Crypto Legal Turbulence

The dominance of cryptocurrency markets by the Securities and Exchange Commission (SEC) has intensified, a trend that has burgeoned concurrently with a sequence of legal battles against crypto enterprises from 2020 onwards.

Nevertheless, the Ripple lawsuit has witnessed a string of court decisions favoring the defendants, challenging the boundaries of the SEC's authority. Casting doubts on the ethical stance of this influential government regulator, Rhode Island attorney John Deaton recently shed light on a revolving door within the SEC.

Are Conflicting Interests Evident in the Ripple Legal Battle?

The term 'revolving door' signifies the movement of high-ranking personnel between public-sector and private-sector roles. In the discourse this week, Deaton pointed out that the former SEC Chair, Jay Clayton, was previously affiliated with Sullivan & Cromwell, the law firm that ConsenSys enlisted upon acquiring J.P. Morgan's blockchain platform Quorum in 2020.

In drawing parallels to the Hinman case, Deaton asserted that Ethereum and ConsenSys received preferential treatment from the SEC, while Ripple Labs faced unjust scrutiny. Joseph Lubin, a co-founder of Ethereum, established ConsenSys in 2014.

Deaton contended that had Ripple Labs engaged the legal services of Sullivan & Cromwell, where former SEC Chair Jay Clayton had been associated, the Ripple lawsuit would not have transpired during Clayton's tenure:

"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."

This led Deaton to assert that the SEC is unfairly favoring certain entities in the cryptocurrency industry, creating winners and losers. Expressing disappointment with journalists who seemingly overlook regulatory ethics, he lamented the indifference of "respectable journalists" towards reporting on conflicts of interest within the SEC.

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

The SEC Critique by Cardano's Founder Captures the Attention of XRP Twitter

The SEC faced additional criticism this week when Charles Hoskinson passionately criticized what he perceives as unjust practices. This critique resonated with X.com's "XRP army," according to Bradley Kimes, founder of Digital Perspectives. Deaton, echoing the frustration, emphasized the need for coherent and consistently applied U.S. securities laws across all ecosystems.

In a recent interview with the crypto podcast Thinking Crypto, Marisa Coppel, senior counsel at the Blockchain Association, expressed skepticism about a settlement in the Ripple lawsuit, stating it would be surprising given the SEC's stance. Despite this, the SEC appears determined to pursue the lawsuit to the Supreme Court, a stance reaffirmed by CEO Brad Garlinghouse, who affirmed his company's readiness to escalate the case to the highest court.

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