- Legal experts have raised questions about gross corruption deals in the United States SEC in regard to cryptocurrency market regulations.
- The conflict of interest has been the top issue that has been pointed to impact the ability of the SEC to deliver impartial regulatory scrutiny.
The cryptocurrency market grew to a trillion-dollar industry within its first decade of existence with very little regulatory scrutiny around the world. Experts forecast that cryptocurrency growth is about to rally parabolically in the next decade fueled by more clear regulatory frameworks from different jurisdictions in addition to mainstream adoption. More institutional cash has proliferated in the cryptocurrency market during the 2022/2023 bear market than any other year before.
As a, a lot of attention has been given to the cryptocurrency market by different regulatory agencies around the world. In the United States, several government agencies led by the SEC and CFTC have significantly upped their crypto scrutiny, especially since the implosion of FTX and Alameda Research.
Legal Experts Call Out SEC Officials for Appearance of Impropriety
According to a crypto-friendly legal expert and founder of Crypto-Law.us, John E Deaton, the United States Securities and Exchange Commission (SEC) has both honorable and rogue officials. On the honorable side, Deaton thinks a portion of officials like Marc Fagel, a retired securities lawyer, demonstrated how to eliminate potential appearances of impropriety by not holding individual stocks, crypto assets, or commodities. Instead, Fagel used independent financial professionals to make decisions for their investments. Deaton noted:
But not everyone does – especially at the Senior level, such as Director, Commissioner or Chairman. Conflicts of interest MUST be taken seriously. In fact, 18 USC 208 – the financial criminal conflict bar – makes it a violation of the statute if a member allows even an “appearance of impropriety.
For instance, Deaton demonstrated how former SEC official Hinman engaged in several acts that involved conflict of interest in regulating IPOs and the cryptocurrency market. Notably, Deaton noted that Hinman continued to collect profits from Simpson Thacher despite the firm having existing issues with the SEC.
There have been honorable SEC Officials like @Marc_Fagel who eliminated potential appearances of impropriety, or conflicts of interest, by not owning individual stocks, crypto, or other commodities, only owning stocks through a 401K, chosen by an independent financial… pic.twitter.com/r4QJDW73MT
— John E Deaton (@JohnEDeaton1) August 24, 2023
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Deaton went further to elaborate how former SEC Chair Jay Clayton tarnished his name after filing for the Ripple lawsuit on his last day in office and was later hired by a hedge fund that made a $1 billion bet on digital assets. As a result, legal experts argue that the SEC has failed to protect small investors despite the recent attempts to appeal the Ripple summary judgment that ruled XRP sales in exchanges do not constitute investment contracts.
#TBThursday – Still an open question. Why wasn’t it appropriate to investigate Jay Clayton’s financial interests when he filed the XRP lawsuit on his last day then immediately was hired by a hedge fund that made a $1B bet on rival tokens three months earlier?
— CryptoLaw (@CryptoLawUS) August 24, 2023
Bigger Picture
The cryptocurrency market is expected to grow exponentially after the United States Congress enacts clear regulatory frameworks for digital assets and stablecoins. According to the latest crypto market data, the total market capitalization stands at about $1.1 trillion, whereby Bitcoin and Ethereum continue to lead the pack with about 70 percent dominance.
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