A government watchdog has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC), accusing the agency of withholding a critical report on ethical conflicts and selective enforcement in its handling of cryptocurrency regulations.
Legal Battle Over SEC Transparency
Empower Oversight, a nonprofit focused on government accountability, is suing the SEC for failing to release a report completed by the agency’s Office of Inspector General (OIG) more than a year ago. Despite repeated requests under the Freedom of Information Act (FOIA), the SEC has yet to make the findings public.
At the center of the lawsuit is former SEC Division of Corporate Finance Director William Hinman. The report allegedly examines potential conflicts of interest related to Hinman’s ties to Simpson Thacher, a law firm with financial interests in Ethereum. Critics have long questioned whether Hinman’s connections influenced the SEC’s regulatory stance on Ethereum, particularly after he publicly stated in 2018 that Ethereum was not a security—a position that shaped the crypto industry’s regulatory landscape.
SEC Accused of “Silent Treatment”
Empower Oversight has been pushing for greater transparency from the SEC since August 2021, filing multiple FOIA requests and lawsuits to uncover details of the agency’s communications with crypto entities. The group argues that the SEC’s refusal to disclose the report suggests a pattern of avoiding accountability.
“The SEC’s silent treatment is old and tired, and its refusal to release these records is, quite frankly, suspicious,” said Tristan Leavitt, president of Empower Oversight. He emphasized that public access to the report is crucial for addressing concerns over regulatory bias and ensuring fairness in crypto enforcement.
Broader Scrutiny on SEC’s Crypto Regulation
The SEC has faced mounting criticism for its approach to cryptocurrency enforcement, with industry leaders—including Coinbase—accusing the agency of targeting crypto firms inconsistently. Former SEC Chair Gary Gensler also came under fire for pursuing aggressive litigation against major companies like Coinbase and Ripple while refusing to clarify regulatory guidelines for the industry.
Empower Oversight remains committed to obtaining the OIG report, arguing that its findings are essential to evaluating the SEC’s handling of crypto regulations and potential conflicts of interest within the agency. If successful, the lawsuit could force the SEC to disclose long-withheld information, further fueling the ongoing debate over the agency’s role in shaping U.S. crypto policy.
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