UPDATE (February 11): On the afternoon of Friday, February 11, 2022, the government filed a motion (PDF) in the litigation referenced below, asking the judge for an extension of time to file its answer to the suit.
WASHINGTON—Empower Oversight filed a lawsuit against the Securities and Exchange Commission (SEC) seeking to compel the SEC to comply with several Freedom of Information Act (FOIA) requests regarding potential conflicts of interest by former high-level officials and their regulation of cryptocurrencies.
In August, Empower Oversight submitted a detailed FOIA request to the SEC seeking any communications related to senior SEC officials and their current and former employers regarding cryptocurrencies. Former senior SEC official William Hinman received millions of dollars in compensation from his former employer, Simpson Thacher, while helping guide the SEC’s regulation of cryptocurrencies. Simpson Thacher is part of a group that promotes Enterprise Ethereum, a cryptocurrency. Hinman said that Ethereum wasn’t a security, which in turn caused a spike in its value.
The creator of another cryptocurrency, known as XRP, was later sued by the SEC, which claimed that it was a security, causing XRP to lose a quarter of its value. The man who brought the lawsuit against XRP, Marc Berger, left for Simpson Thacher shortly after Hinman did the same.
Finally, former SEC chairman Jay Clayton may have had conflicts of interest when he declared that Bitcoin was not a security. After his time at the SEC, Clayton joined a cryptocurrency hedge fund, One River Asset Management, that only worked on Bitcoin and Ether.
To date, the SEC has failed to comply with six of the eight categories of documents in Empower Oversight’s FOIA request. The SEC claimed that searches for two of the eight categories yielded no records relating to communications between Mr. Clayton or Mr. Berger and the SEC’s Office of Ethics Counsel regarding their future employers and any potential recusals. The other six requests remain entirely unanswered.
As a result, Empower Oversight filed a complaint against the SEC in the U.S. District Court for the Eastern District of Virginia to compel the SEC to comply with the other six categories of the FOIA request. As with prior legal action, Empower Oversight is represented by Husch Blackwell, charging the SEC with Failure to Comply with Statutory Deadlines in Violation of FOIA, 5 U.S.C. § 552(a)(6) and Unlawful Withholding of Agency Records in Violation of FOIA, 5 U.S.C. § 552(a)(3). This is Empower Oversight’s second FOIA lawsuit filed since its launch in July of this year.
While waiting for the SEC to comply with its FOIA obligations, Empower Oversight had previously appealed an erroneous SEC decision that had imposed extra costs on the FOIA request, eventually winning a fee waiver for the requests on the basis of being a “media requestor.”
If you have first-hand information you’d like to disclose to assist Empower Oversight with these inquiries, please contact us confidentially here.
UPDATE: Since the announcement of the filing of this lawsuit, the SEC notified Empower Oversight that there were no responsive documents to two more requests, bringing it to 4 of the 8 requests that had no responsive documents.