Ripple Case Faces Scrutiny Amid Allegations of Conflicts of Interest

• The US SEC might be showing a conflict of interest against top crypto entities.
• This bias is even more pronounced in the ongoing Ripple vs. SEC lawsuit.

Amid the ongoing Ripple lawsuit, allegations of conflicts of interest have been levied on the United States Securities and Exchange Commission (SEC) after a series of controversial X posts surfaced. This new wave of discoveries has triggered a fresh investigation into the agency amidst its lawsuit with Ripple Labs. 

According to these posts, two senior SEC officials who were an integral part of the XRP lawsuit, left the commission a few months after the regulator filed the suit against Ripple. 

Marc Berger, who was the Acting Enforcement Director of the SEC when enforcement action was levied on Ripple, left the agency in December 2022. He immediately joined Simpson Thacher where he now serves as the law firm’s global co-head of Government and Internal Investigations. He has also served as global co-head for Ropes & Gray LLP’s Securities and Enforcement Practice.

Similarly, Dalia Blass, the other SEC veteran left the commission a few months ago after serving in the Division of Investment Management and Investment Management Policy. She is now a partner at Sullivan & Cromwell LLP where former SEC Chair Jay Clayton also serves as Senior Policy Advisor. 

All of these top officials’ exit from the SEC has once again raised concerns about improper industry affiliations at the Commission, especially with the regulator pursuing a three-year-long lawsuit with Ripple. There are already ongoing talks that the XRP lawsuit is biased, just like many other enforcement actions that are believed to be directly targeted at the crypto industry’s top players.

Kraken, Binance, and Coinbase were all recently indicted by the SEC with several charges including violation of securities laws. Binance in particular was charged with breaking securities rules, misleading investors and regulators, flouting Know-Your-Customer (KYC) rules, and mishandling customer funds.

SEC Officials Show Conflict of Interest in Ripple Lawsuit

Before coming to work with the SEC, Berger and Blass had connections with some Wall Street law firms. Their sudden transition to the private sector further underscores the perception that the SEC is intentionally directing its lawsuits to the crypto sector while giving a free pass to the top Wall Street giants. 

Even after Judge Analisa Torres ruled on July 13th that XRP is not security, the SEC still mentioned the need to re-examine her decision in an appellate court, indicating that it wasn’t pleased with the outcome. This unrelenting crackdown has forced many industry players to explore whether or not there is another endgame in the lawsuit for the SEC.

Over this same Ripple XRP lawsuit, there has been some other conflict of interest as flagged by industry insiders. Last year, Empower Oversight, a financial watchdog claimed they had obtained documents under the Freedom of Information Act (FOIA)that captured a statement made by former SEC Director of Corporate Finance William Hinman on the motion on what qualifies as securities.

In this statement, Hinman mentioned that Ethereum (ETH) and its transactions are not securities. Empower Oversight thinks that he should not have made the statement as it suggests that he has a conflict of interest and a bias toward Ethereum with the aftermath currently being felt by Ripple Labs and XRP.

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