American government watchdog Empower Oversight is in a legal dispute with the U.S. Securities and Exchange Commission (SEC). The point of contention is the SEC’s alleged failure to adhere to a Freedom of Information Act (FOIA) request pertaining to potential conflicts of interest within the agency’s cryptocurrency regulatory decision-making process.
In August 2021, Empower Oversight submitted a FOIA request seeking communication records about cryptocurrencies from senior SEC officials and their previous and future employers. This request surfaced following revelations that former SEC Director William Hinman received substantial compensation from his prior employer while overseeing the government’s cryptocurrency decisions.
Hey @SECGov, this is not a game. The law requires you to do these searches and you have known it all along.
Time for the foot-dragging and dishonesty to stop. Be serious professionals. Do the searches and produce the documents.
— Jason Foster (@JsnFostr) May 11, 2023
Unfortunately, the SEC failed to comply with this request, prompting Empower Oversight to file a lawsuit in a Virginia federal court in December 2021. Fast forward to May 2023, and the watchdog group has now filed another complaint in the federal D.C. District Court, intensifying its quest for transparency.
“Our fight for transparency continues as the SEC’s consistent lack of it is exacerbating an already bad situation,” said Tristan Leavitt, President of Empower Oversight. He further stressed that the SEC’s evasion of attempts to uncover these conflicts of interest necessitated the new lawsuit.
Empower Oversight’s relentless pursuit of truth gained momentum in May 2022 when they submitted a referral to the SEC Inspector General. This referral spotlighted documents that questioned the SEC and its Ethics Office’s capability to manage Hinman’s potential conflicts of interest regarding cryptocurrency issues and his contacts with his former law firm Simpson Thacher.
The latter firm was part of a consortium promoting Ethereum, a cryptocurrency Hinman publicly deemed not a security. Meanwhile, the SEC maintained in enforcement actions that other similar cryptocurrencies were unregistered securities. The stark contrast in statements is a compelling example of the potential conflicts of interest Empower Oversight is determined to unveil.
In the wake of this development, Empower Oversight opposed the SEC’s motion for summary judgment in an ongoing FOIA lawsuit in October 2022. This lawsuit focuses on documents related to conflicts of interest and selective enforcement in cryptocurrency cases.
As the saga drags on, Empower Oversight remains undeterred. They believe their cause is just and that the SEC’s legal obligation is to provide the requested information. Leavitt added, “This new suit against the SEC should compel the agency to conduct the searches it knows it must perform under the law to give the public the answers we’ve long sought.”
The legal dispute between Empower Oversight and the SEC underscores the crucial role of transparency in government institutions, particularly those entrusted with regulating emerging industries like cryptocurrency. As the battle for openness continues, cryptocurrency investors await the outcome, hopeful for a resolution to usher in a new era of accountability within the SEC.