Lawsuit Filed Against SEC for Failure to Fulfill FOIA Requests on Crypto Conflicts of Interest

On Friday, March 15, 2024, government watchdog Empower Oversight Whistleblowers & Research filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) over public records requests related to digital currencies.

According to the complaint filed in the U.S. District Court for the District of Columbia, Empower Oversight submitted several Freedom of Information Act (FOIA) requests to the SEC on May 15, 2023, seeking communications and documents regarding potential conflicts of interest involving former high-level SEC officials relating to cryptocurrencies like Bitcoin and Ether. However, the SEC failed to adequately respond to the requests within the timeframe required by law.

The requests stemmed from Empower Oversight’s concerns over financial interests held by former SEC Director of Corporate Finance William Hinman and Chairman Jay Clayton. Hinman had continued receiving payments from his former law firm Simpson Thacher, which represented blockchain enterprise Ethereum, while working at the SEC. In 2018, Hinman gave a speech appearing to signal that Ether was not a security. Clayton also made public statements favorable to Bitcoin before departing the SEC to join a crypto hedge fund focused on Bitcoin and Ether.

Empower Oversight referred the potential ethics issues regarding Hinman, Clayton, and other SEC officials to the SEC’s inspector general last year. However, the watchdog group claims the SEC has failed to properly respond to its FOIA requests seeking records of the inspector general’s investigation and SEC discussions about these matters.

According to the lawsuit, the SEC has repeatedly asked for clarification on the requests but has not completed searches or begun processing documents, claiming it wouldn’t finish until at least 2027. The SEC recently disclosed that the inspector general had opened and nearly completed an investigation into the referred matters.

The lawsuit aims to compel the SEC to conduct legally sound searches and release all non-exempt records responsive to the requests. It seeks legal fees and a court order declaring the requested records must be disclosed under FOIA.

Please contact BlockTribune for access to a copy of this filing.