Washington, D.C. – Following multiple lawsuits and years fighting for transparency, Empower Oversight has now obtained the Securities and Exchange Commission (SEC) Office of Inspector General (OIG) Report of Investigation entitled “Financial Conflict of Interest Allegations Against Former Corporation Finance Director William H. Hinman.”
The ten-page report is dated December 9, 2024, 31 months after Empower Oversight forwarded evidence to the OIG for investigation in a May 2022 referral. That’s eight months after the SEC told Empower Oversight that the OIG was in the “final stages” of completing the report, more than five months before the SEC finally released the report yesterday, and nearly two months before Empower Oversight sued the SEC for the report.
In July 2024, Empower Oversight President Tristan Leavitt raised concerns to SEC Inspector General Deborah Jeffrey that the OIG review may have been scoped too narrowly to address all the potential conflicts the organization raised in its referral to the OIG regarding multiple senior officials. Leavitt wrote, “Failure to include those issues in the SEC-OIG’s upcoming report, or a subsequent one, would continue to erode the public’s faith in the ability of the SEC, its Ethics Office, and its Inspector General to identify, mitigate, and hold officials accountable for conflicts of interest like those that generated this controversy.”
Following the release of the report, Empower Oversight founder Jason Foster confirmed that the limited scope was indeed not close to what the whistleblower organization had sought, and was severely limited by only looking for evidence of criminal conflicts of interest rather than more broadly reviewing the SEC’s failure to assure the public it was properly policing perceived conflicts and selective enforcement on cryptocurrency issues.
“By narrowly focusing on whether criminal charges should be brought against Hinman, the SEC OIG completely missed the bigger issue here—an erosion of public trust in the agency due to inadequate transparency and an undeniable lack of faith in the integrity of its cryptocurrency enforcement decisions,” Foster said.
“We fought for years with FOIA requests, letters and lawsuits just to shine a little sunlight on the agency. It’s disappointing that despite all the information we provided, the OIG failed to address the real crux of the problem,” Foster added. “We have now reached an agreement in principle with the SEC to pay some of our legal costs and fees incurred while suing the agency to enforce this transparency.”
Highlights of the report include:
- The OIG appears to have conducted a very narrow inquiry to determine only whether Mr. Hinman violated any criminal conflict of interest laws.
- The OIG found no criminal violations, and the matter was not referred for prosecution.
- The OIG found that Hinman disclosed during onboarding the retirement annuity from his former employer, and adjusted it to a fixed amount through 2020 to comply with ethics rules.
- The OIG found that “Hinman followed SEC ethics rules in preparing and delivering” a controversial speech where, after meeting with promoters of the cryptocurrency Ether, he publicly declared it did not meet the definition of a security.
- The OIG found that Hinman’s speech did not have a “direct and predictable effect” on his own financial interests and found no evidence that Hinman “made the statements for his personal gain.”
- The OIG appears to have ignored the larger issues and context outlined in Empower Oversight’s referral, including that selective enforcement decisions that spared cryptocurrencies in which several senior SEC officials’ previous and future employers had financial interests undermined public confidence in the SEC.
OIG criminal inquiries do appropriately have a more demanding standard of review than administrative inquiries. However, Empower Oversight’s 2022 referral did not request a criminal inquiry, but rather urged the OIG to “independently study these facts and circumstances in order [to] recommend improvements to the SEC’s policies and procedures that would bolster public confidence in its commitment to policing such conflicts more effectively in the future.”
It appears the OIG has conducted no such programmatic review and made no findings or recommendations to improve public confidence in the integrity of its cryptocurrency enforcement decisions, despite the significant public controversy that led to Empower Oversight’s referral.
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.
On Feb. 4, 2025, Empower Oversight filed a lawsuit to compel the agency to release the OIG report. 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.
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