OIG Investigation Into Hinman-Simpson Thacher Relationship May Extend to Former SEC Chair Clayton

Empower Oversight intensified its scrutiny of the SEC in March. The whistleblower sent a letter to an FOIA Officer, requesting records relating to potential ethics violations.

The SEC’s contentious classification of Bitcoin (BTC) and Ethereum (ETH) as non-securities has come under scrutiny due to the involvement of a former high-ranking official with an organization promoting ETH.

According to the SEC, BTC and ETH are not securities, a classification that has benefited both cryptocurrencies. However, the agency's narrative has been challenged by Ripple in its lawsuit against the SEC, which alleges that XRP is also not a security.

The legal battle has highlighted Hinman's connections to Simpson Thacher, a law firm that participates in a group promoting Enterprise Ethereum. Hinman's former affiliation with the organization has raised questions about potential conflicts of interest.

Empower Oversight, a whistleblower organization, has alleged that Hinman received millions of dollars from Simpson Thacher while working at the SEC. This allegation is based on a 2021 lawsuit against the SEC filed by Empower Oversight.

During the Ripple case, the SEC attempted multiple times to protect Hinman's speech-related documents from being disclosed, claiming attorney-client privilege. However, the court denied the SEC's requests.

The documents revealed that Hinman continued to meet with his former employer, despite warnings from the SEC ethics division. This disclosure may further complicate the SEC's narrative.

Empower Oversight's whistleblower status allows them to report potential ethics violations within the federal government. In March, the organization shifted its focus to the SEC, requesting records on the matter from an FOIA Officer.

One aspect of interest to Empower Oversight is former SEC Chair Jay Clayton's statement that Bitcoin is not a security, which aligns with the Hinman speech. Clayton also stated that XRP is a security.

Notably, the former SEC Chair approved the Ripple lawsuit on his last day at the agency. After leaving the SEC, Clayton joined One River Asset Management, a hedge fund that trades BTC and ETH.

The OIG investigation may uncover the SEC's alleged efforts to promote ETH at the expense of XRP. If the investigation reveals conflicts of interest that impacted XRP investors, the SEC may be pressured to withdraw its appeal.

Prior to the lawsuit, XRP was the second-largest cryptocurrency by market capitalization. However, the SEC's classification of XRP as a security has had a significant impact on the token.