The SEC’s Ethereum Dilemma: What Does It Mean for the Future of Crypto?

• Former SEC Director Hinman’s undisclosed meetings, including one with Ethereum co-founder Vitalik Buterin, raise eyebrows.
• SEC’s refusal to disclose a crucial email and Clayton’s involvement in discussions about ConsenSys meetings fuel speculation.
• Questions arise regarding the relationship between Clayton’s former law firm, Sullivan & Cromwell, and ConsenSys.

In a recent tweet, John E Deaton, founder of Crypto Law, shed light on the unredacted details surrounding meetings between former SEC Director William Hinman and ConsenSys, a prominent player in the cryptocurrency space. Deaton revealed that Hinman testified to having 4 to 5 meetings, including one with Ethereum co-founder Vitalik Buterin, between December 13, 2017, and June 8, 2018.

Of particular interest is an email referenced in Hinman’s testimony, which the SEC has refused to disclose despite efforts by EMPOWR to obtain it. Furthermore, Deaton noted that former SEC Chairman Jay Clayton had specific discussions with Hinman regarding the ConsenSys meetings at least once or twice.

The significance of this revelation lies in Clayton’s connection to the law firm Sullivan & Cromwell (S&C). Notably, Ethereum’s Joseph Lubin hired S&C to represent ConsenSys shortly after Clayton assumed the role of SEC Chairman. While this doesn’t imply Clayton’s involvement in any wrongdoing, it raises questions about his keen interest in ConsenSys meetings due to their substantial relationship with S&C.

In Hinman’s deposition, Ripple’s lawyers inquired whether Clayton directed Hinman to reach out to ConsenSys. Hinman testified that he couldn’t recall any specific directions from Clayton.

This phenomenon has been observed recently in the cases of FTX’s Sam Bankman-Fried and SEC Chair Gary Gensler. Coincidentally, Clayton joined the SEC as Chairman on May 4, 2017, shortly after his tenure as a senior partner at S&C. Within two months of Clayton assuming his position, Lubin hired Patrick Berarducci from S&C.

Another intriguing aspect involves attorney Lowell Ness from Perkins Coie, whom Hinman claimed not to remember. Ness sent Hinman a memo and Safe Harbor proposal on March 26, 2018, followed by a meeting on March 28, 2018. Curiously, phrases from Ness’ memo appeared in the initial and final drafts of Hinman’s famous “personal opinion” speech, declaring Ether not to be a security.

Remarkably, Ness has been the primary crypto lawyer for a16z since its inception, while Hinman is currently a partner at a16z. The fact that they are partners with those who influenced Hinman’s stance on Ether raises further intrigue. It’s worth noting that the Safe Harbor proposal solely mentioned ETH as the designated cryptocurrency.

As these revelations unfold, the crypto community awaits more transparency and clarity on the interactions between regulators and key industry players, hoping for a fair and equitable regulatory landscape.