WASHINGTON, DC – More than a year after the Securities and Exchange Commission (SEC) claimed its internal watchdog was “in the final stages of completing” a report on ethical conflicts and the agency’s selective enforcement decisions, Empower Oversight has filed a lawsuit against the agency to obtain the final report.
The lawsuit, filed today, seeks to compel the agency to release the report, since completed by the SEC Office of Inspector General (SEC OIG). The suit also seeks all associated documents, related to an investigation of William Hinman, former Director of the Division of Corporate Finance at the SEC, and possible conflicts of interest. The lawsuit alleges that the SEC has failed to respond to numerous Freedom of Information Act (FOIA) requests for records related to the report and the report itself.
Since August 2021, Empower Oversight has pressed the SEC for more transparency about the decision making on cryptocurrency issues at the SEC. The agency slow-walking and bad faith over nearly three years has forced numerous litigation filings to pry documents loose from the agency.
“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. “Transparency and honesty can go a long way helping answer the very legitimate concerns that so many people have regarding the SEC’s actions to hold officials accountable for the conflicts of interest that have caused so much controversy.”
For the filing document for today’s lawsuit, click here.
Background of Empower Oversight SEC FOIA efforts
(click here for all major SEC FOIA document productions received on SEC oversight.)
In August 2021, Empower Oversight submitted a detailed FOIA request to the SEC seeking all communications between senior SEC officials, their former and future employers, and related entities regarding cryptocurrencies. Since then, Empower Oversight has been at the forefront of the battle for SEC transparency. In December 2021, Empower Oversight filed a lawsuit against the SEC in the Eastern District of Virginia seeking to compel the agency to provide responsive documents to the FOIA requests.
In May 2022, Empower Oversight sent a referral to the SEC OIG based on documents that raised questions about the failure of the SEC and its Ethics Office to properly manage Hinman’s conflicts of interest regarding cryptocurrency issues, contacts with his former law firm Simpson Thacher, and that firm’s interest in promoting one cryptocurrency over others.
In October 2022, Empower Oversight filed its opposition to the SEC’s motion for summary judgment in the ongoing FOIA lawsuit over documents related to conflicts of interest and selective enforcement in cryptocurrency cases.
The SEC had initially agreed to search for records of communications between SEC officials and promoters of certain cryptocurrencies using a specific list of names that the SEC asked Empower Oversight to provide. However, the SEC then promptly reversed course and had refused to search for those records for nearly two years since the August 2021 request, which is still the subject of ongoing Freedom of Information Act (FOIA) lawsuit against the SEC.
In Dec. 2022, Empower Oversight filed a new FOIA request regarding conflicts of interest and selective enforcement by former high-level officials regarding cryptocurrencies. The December 2022 request was an effort to counter the SEC’s bad faith gamesmanship in refusing to conduct searches using the search terms it solicited from Empower Oversight more than a year earlier. The December 2022 FOIA requests to the SEC sought communications between senior SEC officials and their former and future employers and related entities regarding cryptocurrencies by name.
Former senior SEC official William Hinman received millions of dollars in compensation from his former employer, Simpson Thacher, while helping guide the SEC’s enforcement decisions on cryptocurrencies. Simpson Thacher was part of a group that promoted the native cryptocurrency on the Ethereum network, Ether. Of particular interest is a June 14, 2018 speech where Hinman publicly declared that Ether was not a security while the SEC has claimed in enforcement actions that other similar cryptocurrencies were unregistered securities.
In May 2023, Empower Oversight filed a new complaint against the SEC in the United States District Court for the District of Columbia seeking to compel the SEC to comply with the December 2022 FOIA request.
The SEC turned over documents following the May FOIA lawsuit brought by Empower Oversight in the District of Columbia from a December 2022 FOIA request to the SEC. Pursuant to the FOIA request and the lawsuit, the SEC produced 324 pages of additional documents.
In September 2023, Empower Oversight requested through FOIA communications between Clayton, the former Securities and Exchange Commission (SEC) Chairman, and numerous people he may have interacted with regarding the agency’s improper handling of cryptocurrency enforcement decisions.
In March 2024, Empower Oversight continued to request documents through FOIA on Hinman and Clayton using new search terms based on findings from documents in previous FOIA requests.
On March 18, 2024, Empower Oversight filed a lawsuit against the SEC over its failure to comply with an additional Freedom of Information Act after the SEC delayed its searches by asking multiple rounds of clarifying questions and asking Empower Oversight to narrow its requests. Then the SEC failed for months to communicate with Empower Oversight about the May 2023 request. In January Empower Oversight proposed to the SEC a basic timeline for the SEC to provide updates on the progress of the request as well as a schedule for processing records. Yet the SEC was unwilling to commit to such a schedule, and nearly 9 months after the request still had not produced a single page.
In June 2024, Empower Oversight pressed the SEC for additional records regarding the public declarations that multiple cryptocurrencies were not a security by both William Hinman, the former director of the Corporate Finance Division, and Jay Clayton, the former Chairman of the SEC.
On July 16, 2024, Empower Oversight pressed the Office of the Inspector General at the Securities and Exchange Commission (SEC-OIG) to release its report on conflicts of interest by senior Securities and Exchange Commission (SEC) officials and the agency’s selective enforcement decisions on cryptocurrencies. SEC officials had indicated the OIG was “in the final stages of completing” its report earlier in the year. Empower Oversight also urged the OIG to address the potential conflicts of former SEC Chair Jay Clayton in its review.
On Nov. 21, 2024, Empower Oversight pressed for congressional committees to pursue oversight of conflicts of interest at the agency with respect to its regulation of cryptocurrencies, and obtain the inspector general report that was in its “final stages” nearly one year ago.
On Dec. 13, 2024, Empower Oversight submitted a FOIA request for the final OIG report. The request was acknowledged by the agency, stating that they needed a 10-day extension, however, Empower Oversight has not heard from the agency since.
On Dec. 17, 2024, Empower Oversight submitted a FOIA request for the records associated with the SEC-OIG’s completed report. The request was acknowledged by the agency, stating that they needed a 10-day extension, however, Empower Oversight has not heard from the agency since.
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