John Deaton Calls for Transparency On Hinman Case

Pro-crypto lawyer John Deaton has called for transparency regarding the ongoing controversy surrounding former S US SEC Director William Hinman. Deaton has emphasized the need for the public release of the SEC Inspector General’s (IG) report into Hinman’s potential conflicts of interest.

The issue has drawn significant attention as it raises questions about the SEC’s handling of cryptocurrency regulation, particularly concerning Ethereum and Ripple’s XRP.

John Deaton Presses For Release of Report

In a series of X post, John E. Deaton has highlighted the need for the release of the IG’s findings by outgoing US SEC chair Gary Gensler or incoming Chair Paul Atkins. In a recent post, John Deaton confirmed that any credible investigation would establish that violation of U.S. financial conflict of interest laws had taken place.

In his X post, John Deaton noted that even if there is no intentional misconduct, the facts of the matter are clear.

‘With those facts you can prove a violation of 18 USC 208,’ Deaton said, referencing the federal law that forbids conflict of interest in positions within the government. He also pointed out that although the SEC Inspector General’s (IG) report may find no evidence of procedural misconduct on the part of the officials, the general public is entitled to know the findings of the investigation.

US SEC IG Report on William Hinman Completed

This dispute started when William Hinman, the former Director of the SEC’s Division of Corporation Finance, stated in a speech on June 2018 that Ether, the native cryptocurrency of Ethereum, was not a security. This statement affected the crypto market and is often known as Ether’s “free pass”. However, Empower Oversight, a non-profit government accountability organization, later disclosed some potential conflicts of interest associated with Hinman’s business relationship with Simpson Thacher & Bartlett, his former law firm.

According to Empower Oversight, Simpson Thacher is an affiliate of the Enterprise Ethereum Alliance, which supports Ethereum. According to the documents received through the Freedom of Information Act, the SEC Ethics Office had previously reached out to Hinman about his financial interest in the firm. The Ethics Office told him to stay away from any US SEC issues that might concern Simpson Thacher. Nevertheless, the nonprofit claimed that Hinman dismissed these warnings and, therefore, it questioned whether Hinman violated the federal ethics laws.

Under immense pressure by the public, the SEC’s Inspector General finally concluded the inquiry into Hinman. However, the report has not been publicly released to date, with more demands for disclosure made afterwards.

Empower Oversight also underscored accountability saying that the failure by the Ethics Office to enforce Hinman’s recusal gives rise to broader concerns about the SEC’s internal mechanisms. Tristan Leavitt, the President of Empower Oversight, pointed out that “the people who were supposed to prevent Mr. Hinman from violating his ethical duties failed.”

Crypto Community Stance On SEC Regulation

At the same time, the case also raises concerns about the former SEC Chairman Jay Clayton. In his last day at office in the year 2020, Clayton approved the SEC’s decision to drag Ripple Labs to court for selling XRP as a security. Some people have asked as to why Ethereum was let off the hook while XRP was penalized by regulators.

Clayton has been under immense pressure especially because of the Ripple lawsuit and his further engagement in the crypto space. For the record, Donald Trump has recently nominated Clayton for the position of the U.S. Attorney for the Southern District of New York.

Considering the actions taken by Clayton at the SEC, Deaton and other crypto enthusiasts think that it would be appropriate to have the results of the Hinman investigation before moving forward with the appointment especially with recent cancellation of commisioner Caroline Crenshaw renomination.

Subsequently, the unresolved allegations against Hinman and Clayton have fueled skepticism about the SEC’s approach to cryptocurrency regulation. Ripple CEO Brad Garlinghouse and Tesla CEO Elon Musk have both criticized the SEC’s recent actions, amplifying calls for a pro-crypto regulatory environment in the United States.