FOIA Update
March 18, 2024

WASHINGTON – Empower Oversight has filed a lawsuit against the Securities and Exchange Commission (SEC) over its failure to comply with a Freedom of Information Act (FOIA) request seeking documents related to cryptocurrency conflicts of interest at the agency.

“By slow walking their response to our FOIA request, the SEC is stonewalling Empower’s oversight into SEC officials with conflicts of interest on cryptocurrency issues. The public has a right to see all documents that relate to how these public officials violated ethics guidance and how the agency failed to hold them accountable,” said Tristan Leavitt, President of Empower Oversight.

Through previous FOIA requests, Empower Oversight has already uncovered and referred to the Inspector General evidence of ethical issues involving William Hinman, the Director of the Division of Corporate Finance at the SEC from May 2017 to December 2020, as well as former SEC Chairman, Jay Clayton.

Since 2023, Empower has sought additional communications between the SEC officials and employees at Simpson Thacher, including after the ethics office had directed Hinman to recuse himself from any matters that directly affected Simpson Thacher.

Federal law requires that agencies respond to FOIA requests within 20 days. However, 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 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 has been unwilling to commit to such a schedule, and nearly 9 months after the request still has not produced a single page.

More than two years ago, Empower Oversight began pressing the SEC for transparency in how the agency was making decisions on cryptocurrency issues. Despite very little cooperation from the SEC, Empower learned through FOIA requests that Hinman both had a personal financial interest in cryptocurrencies the SEC was regulating and also broke ethics guidance by meeting with other entities that had an interest. After one of those meetings, Hinman had declared in a June 2018 speech that Ether was not a security.

Empower Oversight has also raised concerns about public comments made by Clayton that affirmed previous Hinman statements about Ether and declared that Bitcoin, another cryptocurrency, was not a security. At the end of Clayton’s tenure, the SEC filed suit against Ripple Labs alleging that its XRP currency was a security. After leaving the SEC, Clayton reportedly joined cryptocurrency hedge fund One River Asset Management, which focuses exclusively on Bitcoin and Ether (not XRP).

Background of Empower SEC FOIA efforts

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 litigation to pry documents loose from the agency.

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.

Empower Oversight has continued to request documents through FOIA on Hinman and Clayton using new search terms based on findings from documents in previous FOIA requests.