Press Release
October 5, 2022

WASHINGTON – Empower Oversight filed its opposition to the Securities and Exchange Commission’s (SEC)’s motion for summary judgment in the ongoing Freedom of Information Act (FOIA) lawsuit over documents related to conflicts of interest and selective enforcement in cryptocurrency cases.

The filing demonstrates that the SEC intentionally misinterpreted the plain text of Empower Oversight’s request, admittedly ignored statutory deadlines without cause, and solicited search terms to locate documents, only to ignore those as well.

Jason Foster, Founder and President of Empower Oversight, issued the following statement:

“It’s abundantly clear that the SEC is doing everything within its power to hide information from the public about these issues. The key question is why? Despite its stubborn delays and resistance to our FOIA requests, the few documents that we managed to pry loose from the agency point to serious ethical concerns.

“Perhaps it is merely bureaucratic incompetence, but it is also possible that the SEC is acting like it has something to hide because it actually has something to hide. That’s why FOIA exists, to hold government accountable through transparency. The law requires more than the SEC seems willing to provide.”

In May of this year, Empower Oversight sent a referral to the SEC Inspector General based on documents that raised questions about the failure of the SEC and its Ethics Office to properly manage SEC official William 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

Since then, more emails have come to light not referenced in the referral, raising new questions about Hinman’s contacts with partners at his former firm, including a contact with Simpson Thacher partner Chris Lin to “report on what is going on in China” around the time a Chinese client had business before the SEC.

From the outset, the SEC has resisted complying with its legal disclosure obligations. As Empower Oversight explained in its court filing this week, the SEC admittedly failed to provide a FOIA “determination” within the time required by law, without citing any reason it could not meet the deadline. The SEC began complying only after Empower Oversight filed its lawsuit.

“Empower Oversight was harmed by the SEC’s delay because it had to expend resources—including filing fees and attorney’s fees—to enforce its statutory right to information.” (p. 19). Empower Oversight is asking the court to declare that the SEC violated the statute and allow Empower Oversight to recover its costs under the law, which is designed “to reward plaintiffs whose filing of lawsuits alters the government’s slowness and brings about disclosure.” (p. 19, footnote 4).

In its August 2021 FOIA request, Empower Oversight sought: “all records relating to communications between certain SEC officials and any personnel from certain outside entities, ‘including’ emails between those officials and email addresses at specific domain names associated with those entities. But Empower Oversight did not limit the scope of its request only to those domain names.” (p. 2).  This request was designed to obtain all records of communications between SEC officials like Hinman and people at outside entities like his law firm Simpson Thacher, regardless of how the communications occurred or whether they passed through Simpson Thacher’s official email domain.

Empower Oversight points to a conference call with SEC FOIA staff in January of this year—and the SEC’s refusal to conduct searches using the terms it asked for during that call—as evidence of the agency’s unreasonably feeble search efforts and bad faith.  

Empower Oversight learned on that call that the SEC had only searched for emails from three specified domain names, even though the request was not limited to those domain names.  During that call, the SEC claimed it could not search more broadly because “FOIA staff could not know the names of every individual associated with each of the entities in the request [and] asked Empower Oversight to provide a specific list of names for the agency to search. Thus, the parties agreed that Empower Oversight would provide a list of names.” (p. 12-13).

The SEC claimed, in its motion for summary judgment, that it didn’t have to “comply with a request so broad that [it] would impose an unreasonable burden on the agency.” And yet, when the SEC sought to limit the scope of the search, Empower Oversight agreed. In response to this good faith effort to accommodate the SEC’s concern about an overly broad search, the SEC then refused to conduct the narrowed search.

As Empower Oversight explained in its court filing, the SEC sought to narrow its search by “soliciting a list of names to define ‘any personnel’ more specifically and … Empower Oversight obliged. … The agency failed to use the list of names that it solicited from Empower Oversight to conduct searches.” (p. 21).  

In short, the SEC acted unreasonably and in bad faith by “asking Empower Oversight to provide the list of names, which it promptly provided and the SEC promptly ignored.” (p. 23).  

Empower Oversight initially filed this lawsuit in December 2021, after months of delay by the SEC. A month later, Empower Oversight appealed the SEC’s initial false claim that it had “no records” related to portions of the request. In January 2022, Empower Oversight submitted a second FOIA request, seeking all records related to the SEC’s processing of its first request—which yielded documents cited and attached as exhibits in this week’s court filing about the SEC’s inadequate searches. In February, Empower Oversight provided the SEC with the list of names it had requested on a conference call to narrow to the scope of its search. Jason Foster also published an article detailing why we need more transparency in the cryptocurrency realm. 

If you have first-hand information you’d like to disclose to assist Empower Oversight with these inquiries, please contact us confidentially here.