2024 10 25 Letter To Congress SEC Crypto Conflicts

November 15, 2024
VIA ELECTRONIC TRANSMISSION
Chairman Patrick McHenry Ranking Member Maxine Waters

Committee on Financial Services Committee on Financial Services
U.S. House of Representatives U.S. House of Representatives
Chairman French Hill Ranking Member Stephen F. Lynch

Committee on Financial Services Committee on Financial Services
Subcommittee on Digital Assets, Financial Subcommittee on Digital Assets, Financial
Technology, and Inclusion Technology, and Inclusion
U.S. House of Representatives U.S. House of Representatives
Chairman Sherrod Brown, Ranking Member Tim Scott

Committee on Banking, Housing and Urban Committee on Banking, Housing and Urban
Affairs Affairs
U.S. Senate U.S. Senate
Dear Chairmen and Ranking Members:

Empower Oversight Whistleblowers & Research (“Empower Oversight”) is a
nonpartisan, nonprofit educational organization dedicated to enhancing independent oversight
of government and corporate wrongdoing. It works to help insiders safely and legally report
waste, fraud, abuse, corruption, and misconduct to the proper authorities, and seeks to hold
those authorities accountable to act on such reports by, among other means, publishing
information concerning the same.
Over the past few years Empower Oversight has filed a series of Freedom of Information
Act (“FOIA”) requests for records involving former Securities and Exchange Commission
(“SEC”) Chairman Jay Clayton—whom President-Elect Trump has announced will be his
nominee to be the U.S. Attorney for the Southern District of New York—and former SEC
Division of Corporation Finance Director William Hinman, both of whom served from May 2017
until December 2020 at the SEC. The records produced revealed conflicts of interest and
possible self-dealing by officials involved in the SEC’s regulation of cryptocurrency. In May
2022, Empower Oversight referred this evidence to the SEC Office of Inspector General (“SEC
OIG”), which opened an investigation. The SEC OIG should be issuing its report to the SEC
shortly, if it has not already issued it.
This matter needs congressional oversight for several reasons. First, President-Elect
Trump has vowed to make the United States the “crypto capital of the planet.” 1 In light of SEC
1 https://apnews.com/article/donald-trump-bitcoin-cryptocurrency-stockpile-
11166 FAIRFAX BLVD., STE. 500 #1076, FAIRFAX, VA 22030 PAGE 1 OF 22

Chairman Gary Gensler’s crusade against crypto over the past few years, this case study may help
Congress understand what steps might strengthen the United States’ ability to compete with
China and others in this space.
Second, this matter highlights the perils of unclear statutory guidance giving a regulatory
and enforcement agency free rein. The SEC’s unequal application of a 90-year-old law to
similarly situated crypto entities, initiated under Chaiman Clayton—bringing enforcement
actions against some while giving a free pass to another—removes any predictability for
investors. Government regulators should not be picking winners and losers in a free market.
Understanding this matter may assist Congress in considering whether updates to the Securities
Act of 1933 are necessary to provide legal clarity and market stability.
Third, this matter is a stunning example of selective regulatory capture—regulators who
completely defer to certain segments of the industry with which they are friendly. Only some
actors in the crypto industry benefited. SEC officials deferred to industry insiders with a ‘horse
in the race’ who wanted the SEC to pick winners and losers. Then those agency officials later
went to work for those who benefited from their actions at the SEC. While it may be impossible
to completely prevent federal regulators making decisions based on the anticipation of a future
personal financial interest, such as a particular offer of employment at the end of one’s term,
Congress should assess whether current ethics laws and regulations are sufficient or whether
additional legislation is needed.
Finally, this matter raises deeply troubling questions about self-dealing at the top of the
SEC. Because of his continuing retirement compensation, Bill Hinman had a financial interest
while still at the agency. This has had a serious negative impact on the public’s perception of the
SEC’s decisionmaking. As the SEC’s top ethics attorney wrote to Hinman: “It’s . . . a serious
optics issue – you can’t be seen to be granting special access to a firm you have a financial
interest in.”2 Yet that is exactly what the public has seen in Hinman’s actions. Since the law in
this area is clear, Congress should conduct oversight of the ethics process in the Executive
Branch—particularly at regulatory agencies with enforcement powers as consequential in the
markets as the SEC.
With a new Administration and turnover in the SEC’s leadership imminent, we
respectfully urge you to request the SEC OIG’s report on this matter in order to more fully
understand how the SEC failed to mitigate conflicts of interest during Clayton’s and Hinman’s
tenure.
BACKGROUND
President Trump nominated Clayton as SEC Chairman in January 2017. As a partner at
the law firm Sullivan & Cromwell, Clayton had spent two decades representing clients such as
Morgan Stanley, Goldman Sachs, Barclays Bank, Deutsche Bank AG, UBS, and Ally Financial
Inc.3 His firm had innumerably more clients impacted by SEC decision-making, such as
JPMorgan Chase.4
On March 3, 2017, the U.S. Office of Government Ethics (“OGE”) released Clayton’s
Public Financial Disclosure Report (OGE Form 278e) and accompanying ethics agreement. 5 The
6f1314f5e99bbf47cc3ee6fc6178588d.
2 https://empowr.us/wp-content/uploads/2022/04/2022-03-25-SEC-Responsive-Records-compressed.pdf at 141.
3 See https://web.archive.org/web/20170226222028/https:/www.sullcrom.com/lawyers/Jay-Clayton.
4 https://web.archive.org/web/20210129161022/https://www.reuters.com/article/cbusiness-us-sec-conflicts-
exclusive-idCAKCN1AX2D4-OCABS.
5 See https://www.documentcloud.org/documents/4388156-Jay-Clayton-Financial-Disclosure.html;
https://static1.squarespace.com/static/5722daf11d07c02f9c1739cc/t/58c4b2996a4963946ca00b1f/1489285786
203/Clayton%2C+Walter+J.++finalEA.pdf.

documents did not reveal the full list of clients Clayton had represented. Clayton outlined his
plan to resign from the partnership of Sullivan & Cromwell if confirmed and to recuse for one
year after that from matters in which Sullivan & Cromwell was a party or represented a party. 6 It
is unclear why Clayton’s ethics agreement only outlined recusing for one year rather than the two
years required by Executive Order 13770.7 In addition to the ethics agreement, Clayton was also
bound by ethics regulations to “take appropriate steps to avoid an appearance of loss of
impartiality in the performance of [his] official duties.” 8
When Clayton was nominated as Chairman, he made plans to bring Hinman to the SEC.
Clayton had worked closely in private practice with Hinman, a partner at the law firm Simpson
Thacher & Bartlett. Together, Clayton and Hinman led the Chinese company Alibaba to launch
its successful initial public offering (“IPO”) in 2014.9 This was the largest IPO in history at a
record-setting $25 billion.10 While it is unknown whether Clayton continued to advise Alibaba
after the IPO, documents show Hinman represented the company up through his appointment to
the SEC.11
On May 2, 2017, the Senate voted to confirm Clayton, and on May 4 he was sworn in as
SEC Chairman.12 On May 9, 2017, Clayton announced the appointment of Hinman as the
Director of the SEC’s Division of Corporation Finance. 13
In preparation for his appointment, SEC Designated Ethics Official Shira Pavis Minton
(the top ethics attorney at the agency) contacted Hinman on April 21, 2017 to introduce herself
and walk Hinman through the ethics and financial disclosure process. 14 Hinman informed
Minton:
I have negotiated with the firm to . . . receive fixed pension amounts through the
end of 2020. These amounts would approximate what I would receive under the
pension based on assumptions regarding firm income over that period. My amount
will be approximately $1.59 [million] per year, which is what the firm's projections
indicate I was likely to receive under the plan.
The $130,400 monthly pension payments from Simpson Thacher totaled approximately seven
times Hinman’s $217,000 annual SEC salary.15
On April 28, 2017, Minton emailed Hinman with “initial guidance from OGE.” 16 She
wrote:
6 https://www.documentcloud.org/documents/4388156-Jay-Clayton-Financial-Disclosure.html.
7 https://www.federalregister.gov/documents/2017/02/03/2017-02450/ethics-commitments-by-executive-
branch-appointees. Recusal for two years may also have been required under 5 C.F.R. § 2635.503, depending on
when Clayton received his last “covered payment” from Sullivan & Cromwell. Clayton seemed to agree in his
nomination hearing that he was required to recuse for two years in any matter in which Sullivan & Cromwell
represented a party. https://www.govinfo.gov/content/pkg/CHRG-115shrg24998/pdf/CHRG-115shrg24998.pdf
at 23.
8 5 C.F.R. § 2635.501(a).
9 https://www.sec.gov/Archives/edgar/data/1577552/000119312514333674/d709111df1a.htm.
10 https://www.ft.com/content/0f97cc70-4208-11e4-a7b3-00144feabdc0.
11 See https://www.documentcloud.org/documents/22277221-21-02531-foia-june-15-2022-release. Of note,
Alibaba revealed in May 2016 that it was under investigation by the SEC.
https://www.reuters.com/article/technology/sec-probes-alibaba-accounting-methods-shares-dive-
idUSKCN0YG1TZ. A press report in November 2016 indicated the SEC’s investigation of Alibaba was being assisted
by at least one internal whistleblower. https://nypost.com/2016/11/01/high-up-alibaba-staffer-helping-sec-probe-
into-tech-giant; see also https://www.barrons.com/articles/alibaba-stock-sinks-insider-aiding-sec-inquiry-
1478008406.
12 https://www.sec.gov/newsroom/press-releases/2017-94.
14 https://empowr.us/wp-content/uploads/2022/04/2022-03-25-SEC-Responsive-Records-compressed.pdf at 15.
15 https://www.businessinsider.com/sec-simpson-partner-pay-biden-golden-parachutes-2021-1.
16 Id. at 74.

Of particular note, OGE advised that if the proposal from [Simpson Thacher] would
fix the payments only during your term of government service (i.e., if you would
return to receiving retirement benefits that are in part calculated based on the
profits of the firm at the conclusion of your government service), you would
continue to have a financial interest in the firm’s profitability while you are in
government. This means you could not participate in any SEC particular matters
that would directly and predictably affect the firm under 18 USC 208. In other
words the future interest is enough to give you a full financial interest in the firm. 17
The criminal conflict of interest statute at 18 U.S.C. § 208, “Acts affecting a personal
financial interest,” reads:
[W]hoever, being an officer or employee of the executive branch of the United
States Government . . . participates personally and substantially as a Government
officer or employee, through decision, approval, disapproval, recommendation, the
rendering of advice, investigation, or otherwise, in a judicial or other proceeding,
application, request for a ruling or other determination, contract, claim,
controversy, charge, accusation, arrest, or other particular matter in which, to his
knowledge, he . . . has a financial interest[.]18
Each violation of the statute is subject to up to five years imprisonment and/or a penalty of
$50,000 per violation—or “the amount of compensation which the person received or offered for
the prohibited conduct[.]”19
Federal regulations at 5 C.F.R. § 2635 further interpret and implement 18 U.S.C. § 208.
They read: “A particular matter will have a direct effect on a financial interest if there is a close
causal link between any decision or action to be taken in the matter and any expected effect of
the matter on the financial interest. . . . It is not necessary, however, that the magnitude of the
gain or loss be known.”20 The regulation continues:
The term particular matter encompasses only matters that involve deliberation,
decision, or action that is focused upon the interests of specific persons, or a
discrete and identifiable class of persons. Such a matter . . . may include
governmental action such as legislation or policy-making that is narrowly focused
on the interests of such a discrete and identifiable class of persons. 21
On May 12, 2017, Minton provided Hinman with a draft ethics agreement for Hinman to
sign.22 It read: “Under 18 U.S.C. § 208, I am disqualified from participating personally and
substantially in any particular matter that would have a direct and predictable effect” on a list of
entities, which included Simpson Thacher, Alibaba, and Ant Financial Services Group, Alibaba’s
$60 billion financial arm.23
The memorandum further detailed a “screening arrangement I have implemented to
ensure that I comply with my obligation to recuse myself from certain matters with which I have
a financial interest, or a personal or business relationship.” 24 The arrangement required that an
17 Id.
18 18 U.S.C. § 208(a).
19 18 U.S.C. § 216.
20 5 U.S.C. § 2635.402(b)(1).
21 5 C.F.R. § 2635.402(b)(3).
22 https://empowr.us/wp-content/uploads/2022/04/2022-03-25-SEC-Responsive-Records-compressed.pdf at
108.
23 Id. at 112.
24 Id.

SEC employee “screen all SEC matters directed to my attention that involve outside entities or
that require my participation, to determine if they involve any of the entities or organizations
listed above” (such as Simpson Thacher or Alibaba). 25 The memo was finalized on May 15,
2017.26
Pursuant to regulations, Minton also provided Hinman with initial training on his
obligations under the criminal conflict of interest statute and the ethics regulations. 27 As she
later described in an email responding to Hinman seeking approval for a meeting including
Simpson Thacher: “[Y]ou have a full financial conflict with your old firm, not just an impartiality
one. [H]ence, you should not be having any meetings with your old firm, even group
meetings.”28 When Hinman requested a phone call to discuss the issue further, the ethics counsel
emailed in response: “[Y]ou have a bar under the criminal financial conflict with Simpson
[Thacher] because you have an ongoing financial interest in the firm. [M]eeting with them while
having such a conflict is not permitted. As we discussed during your briefing – even
calls with them are not permitted.”29
Like Clayton’s financial disclosure form, the public release of Hinman’s financial
disclosure raised concerns given the extent of Hinman’s conflicts. In response to an August 2017
inquiry from a Reuters reporter, an SEC spokeswoman provided a comment that Hinman was
“subject to and complying with all applicable ethics laws, rules, and regulations, and . . . working
with the agency’s ethics counsel as needed.” 30
HINMAN’S DISREGARD OF ETHICS COUNSEL
In July 2017—less than a month before the Reuters story—a consultant emailed Hinman
on his SEC email address “seeking an expert in investment banking and the IPO process in
China” because “you were involved in the Alibaba IPO.” 31 Hinman responded by copying a
Simpson Thacher partner in Hong Kong, who he said could provide the requested advice. 32
While the SEC does not keep phone records for its officials, Hinman had frequent contact
with Simpson Thacher partners over his SEC email account. It is unknown if he had additional
contact over any personal email accounts, or what phone calls he had with attorneys at Simpson
Thacher.
Hinman met in person with Simpson Thacher partners on multiple occasions. For
example, he met with Joshua Bonnie on November 28, 2017; September 6, 2018; September 18,
2019; and September 17, 2020. Hinman’s meetings included Simpson Thacher attorneys with
business pending before the SEC, as when he met in SEC offices with a Hong Kong-based
partner with a $100 million IPO under consideration by the SEC, as described later in this
letter.33
25 Id. at 114.
26 https://www.documentcloud.org/documents/22277216-21-02533-foia-june-15-2022-release at 1.
27 5 C.F.R. § 2638.304.
28 https://empowr.us/wp-content/uploads/2022/04/2022-03-25-SEC-Responsive-Records-compressed.pdf at
137.
29 Id. at 141.
30 https://web.archive.org/web/20210129161022/https://www.reuters.com/article/cbusiness-us-sec-conflicts-
exclusive-idCAKCN1AX2D4-OCABS.
31 https://www.documentcloud.org/documents/21274400-hinman-simpson-thacher-emails-21822 at 60.
32 Id. The Simpson Thacher partner responded that he was “happy to discuss,” adding, “Bill, [t]hank you for
thinking of me.” Id.
33 See https://empowr.us/wp-content/uploads/2022/05/2022-5-9-JF-to-SECOIG-Ethics-Office-Referral.pdf at 9;
see also https://www.documentcloud.org/documents/22277221-21-02531-foia-june-15-2022-release.

RISE OF ENTERPRISE ETHEREUM ALLIANCE
At the time Clayton and Hinman began at the SEC in May 2017, their clients Alibaba and
Ant Financial had recently started experimenting with the blockchain network Ethereum. 34
Ethereum was conceived by Canadian Vitalik Buterin, and used on its blockchain the native
cryptocurrency Ether, which was traded on public exchanges.
One of Ethereum’s co-founders, Canadian Joseph Lubin, held 9.5% of Ether when it
became public on July 30, 2015. Lubin founded ConsenSys to develop applications running on
the Ethereum blockchain and otherwise promote the use of Ethereum, which in turn increased
the value of Ether. ConsenSys competed with companies like Ripple Labs, Inc., which developed
software products operating on the XRP blockchain ledger. The blockchains’ respective
cryptocurrencies (Ether and XRP) also competed against each other in public exchanges.
In October 2016, Lubin hired a ConsenSys employee to work full-time building a
coalition promoting Ethereum for corporate uses.35 The coalition hosted a meeting in New York
City on December 15, 2016.36 An article describing the meeting called the rumored “Enterprise
Ethereum” “[a] secretive project” “veiled behind an unusual degree of privacy.” 37 The article
continued: “So far, the reason for the secrecy appears to be concerns about the competition
coming from other sectors of the blockchain industry. But, there’s reason to be skeptical about
this possible reasoning for the group’s launch.” 38
On February 27, 2017, The New York Times reported that the new Enterprise Ethereum
Alliance, set to be announced the next day, would include a number of corporate giants, like
Microsoft and JPMorgan.39 Both were longtime client of Simpson Thacher, which had
represented Microsoft in transactions like its $26 billion purchase of LinkedIn less than a year
earlier40 and its launch of a $17 million bond in January 2017.41 Simpson Thacher would
continue to represent Microsoft and JPMorgan throughout Hinman’s time at the SEC, such as
when Microsoft acquired GitHub for $7.5 billion in June 2018. 42
On February 28, 2018 ConsenSys issued a formal press release listing 30 of the
Enterprise Ethereum Alliance’s founding members—“among others.”43 Although not listed in the
34 https://medium.com/@andrewkeys_88339/ethereum-growing-exponentially-in-china-31f1d24c8ee9; see also

https://bitcoinmagazine.com/culture/chinas-interest-and-investment-ethereums-blockchain-expands1.
35 https://www.rootdata.com/member/Bob%20Summerwill?k=MTE1MjA%3D; see also
https://bobsummerwill.com/2017/10/18/bobs-next-adventure.
36 https://www.coindesk.com/markets/2017/01/05/what-is-enterprise-ethereum-details-emerge-on-secret-
blockchain-project.
37 Id.
38 Id.
39 https://www.nytimes.com/2017/02/27/business/dealbook/ethereum-alliance-business-banking-security.html.
40 https://www.stblaw.com/about-us/news/view/2016/06/14/microsoft-to-acquire-linkedin-for-$26.2-billion.
41 https://www.law360.com/articles/886714/simpson-thacher-guides-microsoft-s-17b-jumbo-bond; see also
https://www.stblaw.com/about-us/news/view/2017/01/17/simpson-thacher-represents-jpmorgan-as-financial-
advisor-to-reynolds-american-in-announced-$49-billion-merger-with-british-american-tobacco;
https://www.stblaw.com/about-us/news/view/2017/04/11/simpson-thacher-represents-jpmorgan-as-financial-
advisor-to-century-communities-in-announced-business-combination-with-ucp; https://www.stblaw.com/about-
us/news/view/2017/06/09/simpson-thacher-represents-jpmorgan-in-committed-financing-for-clayton-dubilier-
rice-s-$2.5-billion-acquisition-of-hd-supply-holding-s-waterworks-division; https://www.stblaw.com/about-
us/news/view/2017/07/19/simpson-thacher-represents-jpmorgan-in-paragon-offshore-s-recently-effective-
chapter-11-bankruptcy-cases; https://www.stblaw.com/about-us/news/view/2017/09/18/simpson-thacher-
represents-jpmorgan-in-$8.5-billion-bridge-financing-for-northrop-grumman-s-announced-acquisition-of-orbital-
atk; https://www.stblaw.com/about-us/news/view/2017/10/03/simpson-thacher-represents-jpmorgan-in-bridge-
financing-for-genuine-parts-company-s-approximately-$2-billion-acquisition-of-alliance-automotive-group;
https://www.stblaw.com/about-us/news/view/2018/04/12/simpson-thacher-represents-jpmorgan-in-exchange-
offer-and-credit-agreement-facilities-by-lions-gate.
42 https://news.microsoft.com/2018/06/04/microsoft-to-acquire-github-for-7-5-billion.
43 https://entethalliance.org/enterprise-ethereum-alliance-launches.

press release, Perkins Coie was also reportedly “a legal advisor to the [Enterprise Ethereum
Alliance] since its launch.”44
According to February 27 The New York Times article, some corporations had made
deep investments in Ethereum, “bet[ting] that Ethereum will win out in the race to become the
standard blockchain for future business operations.”45 The article specifically noted that
JPMorgan, a frequent client of both Sullivan & Cromwell and Simpson Thacher, “has created a
version of Ethereum known as Quorum that the bank has been using in tests to move money
between JPMorgan branches in different countries. Quorum will become a part of the new
version of Ethereum being developed by the alliance.” 46 Another article around this time noted
that JPMorgan “has developed several projects based on” the Ethereum codebase. 47 Two months
after the Enterprise Ethereum Alliance launched, JPMorgan would depart the bank consortium
of Ethereum rival R3.48
At the same time, on April 26, 2017, Ripple announced that ten financial institutions had
joined its global payments network,49 which already included Bank of America, RBC, and UBS. 50
A May 11, 2017 Ripple blog post was titled “How We Are Further Decentralizing the XRP
Ledger to Bolster Robustness for Enterprise Use.”51 Later that month CNBC reported Ripple was
“suddenly sitting on billions of dollars worth of cryptocurrency,” based on Ripple’s substantial
holdings of the XRP token.52
Hinman later noted in a deposition: “I was someone in the firm [Simpson Thacher] that
people came to with questions of that sort [regarding the application of the federal securities
laws to transactions in digital assets]. . . . I had taken an interest in it and had studied it a little
bit.”53 Hinman acknowledges he was aware of Ether when he joined the SEC, but claims he was
not aware of Ether’s market competitor, the XRP token, at the time. 54
Soon after Clayton and Hinman took office in May 2017, the Enterprise Ethereum
Alliance more than tripled in size when it added another 86 members. 55 The new members
included Zcash, which had partnered with JPMorgan on its Ethereum-based Quorum. 56 XRP
remained the third most valuable cryptocurrency, with reports in mid-July 2017 noting that XRP
had risen 3977% in the first half of 2017.57
44
https://web.archive.org/web/20170903052936/https://www.financemagnates.com/cryptocurrency/news/perkins
-coie-joins-enterprise-ethereum-alliances-legal-industry-group.
45 https://www.nytimes.com/2017/02/27/business/dealbook/ethereum-alliance-business-banking-security.html.
46 Id. See also https://www.coindesk.com/markets/2016/10/03/jp-morgan-is-quietly-developing-a-private-
ethereum-blockchain.
47 https://www.coindesk.com/markets/2017/02/13/jp-morgan-santander-said-to-join-new-ethereum-blockchain-
group.
48 https://www.reuters.com/article/us-jpmorgan-r-idUSKBN17T2T4/;
https://www.coindesk.com/markets/2017/04/27/r3-blasts-jp-morgan-consortium-exit-as-at-odds-with-global-
banks.
49 https://ripple.com/ripple-press/ten-financial-institutions-join-ripples-global-payments-network.
50 https://www.cnbc.com/2017/05/26/bitcoin-rival-ripple-is-sitting-on-many-billions-of-dollars-of-xrp.html.
51 https://ripple.com/insights/how-we-are-further-decentralizing-the-ripple-consensus-ledger-rcl-to-bolster-
robustness-for-enterprise-use.
52 Id.
53 https://www.crypto-law.us/wp-content/uploads/2023/06/Part-1.pdf at 37.
54 https://www.crypto-law.us/wp-content/uploads/2023/06/Part-1.pdf at 50.
55 https://entethalliance.org/enterprise-ethereum-alliance-release-05-19-2017.pdf; see also
https://www.coindesk.com/markets/2017/05/21/enterprise-ethereum-alliance-adds-86-members-to-blockchain-
consortium.
56 https://www.coindesk.com/markets/2017/05/22/jpmorgan-partners-with-zcash-on-blockchain-security.
57 https://www.cnbc.com/2017/07/21/ripples-xrp-digital-currency-rose-3977-percent-in-the-first-half-of-
2017.html.

ETHEREUM ALLIANCE PLAYS POLITICS
On July 18, 2017, approximately two months after Clayton and Hinman were sworn in,
the SEC released its first guidance on what makes it consider a digital token to be a security that
should be registered with the SEC.58 This guidance was outlined in a joint statement from
Hinman’s Divisions of Corporation Finance and the Division of Enforcement. 59 The SEC found
that tokens issued on the Ethereum blockchain by The DAO, which had raised some $150
million U.S. dollars’ worth of Ether in exchange for the tokens, were securities. 60
That same month, the Enterprise Ethereum Alliance revealed it was working to develop a
working group on legal issues surrounding Ethereum,61 and ConsenSys hired former Sullivan &
Cromwell attorney Patrick Berarducci as its deputy general counsel.62 According to press
accounts, Berarducci “was quickly snatched up by the blockchain company ConsenSys to make
sure the developing technology complies with existing laws and regulations.” 63 Berarducci had
worked with Clayton at Sullivan & Cromwell for seven years. 64
The Enterprise Ethereum Alliance formally announced its Legal Industry Working Group
(“EEA LIWG”) on August 14, 2017.65 It incorporated four banks that were already members of
the Enterprise Ethereum Alliance, like JPMorgan, and ten law firms new to the Alliance,
including Perkins Coie.66 The stated purpose of the EEA LIWG was to “tackle important policy
issues raised by” Ethereum.67
According to the ConsenSys employee who organized the Alliance, 68 by September 2017
Simpson Thacher was assisting with the EEA LIWG effort. 69 This is not surprising, given that
huge Simpson Thacher clients such as JPMorgan and Microsoft were members of the Enterprise
Ethereum Alliance.70 Yet the involvement of either Simpson Thacher or its clients in the Alliance
raises questions about Hinman’s subsequent interactions to benefit Ethereum.
The EEA LIWG finally hit pay dirt when Lubin emailed SEC Division of Trading and
Markets Deputy Director Gary Barnett on November 27, 2017, copying ConsenSys general
58 https://www.sec.gov/newsroom/speeches-statements/corpfin-enforcement-statement-report-investigation-dao.
59 Id.
60 https://www.sec.gov/files/litigation/investreport/34-81207.pdf.
61 https://www.coindesk.com/markets/2017/08/14/legally-binding-smart-contracts-10-law-firms-join-enterprise-
ethereum-alliance.
62 https://www.linkedin.com/in/patrick-berarducci.
63 https://news.bloomberglaw.com/business-and-practice/tech-savvy-attorneys-in-heavy-demand-amid-emerging-
tech.
64 https://www.linkedin.com/in/patrick-berarducci.
65 https://entethalliance.org/ethereum-enterprise-alliance-legal-industry-working-group-press-release-2.
66 https://www.financemagnates.com/cryptocurrency/news/perkins-coie-joins-enterprise-ethereum-alliances-
legal-industry-group.
67 https://entethalliance.org/ethereum-enterprise-alliance-legal-industry-working-group-press-release-2.
68 https://www.rootdata.com/member/Bob%20Summerwill?k=MTE1MjA%3D.
69 https://docs.google.com/presentation/u/1/d/1_RsFbP-
bDnrO2GE3tPlyMmJ5l1ITozbWTBj4fCS3Btc/htmlpresent. In a 2021 deposition, Hinman responded in the
negative to the question: “[D]o you believe you represented any company, individual, or entity that was involved in
the Ethereum Foundation . . . ?” https://www.crypto-law.us/wp-content/uploads/2023/06/Part-1.pdf at 38-39.
Hinman also claimed: “I don’t know all the entities that are affiliated with [the Ethereum Foundation], but I’m not
aware of a connection between the firm and the Foundation.” Id. at 41. Yet in addition to its apparent work on the
Enterprise Ethereum Alliance’s Legal Industry Working Group, Simpson Thacher had formally joined the broader
Enterprise Ethereum Alliance at least by the summer of 2018. https://entethalliance.org/wp-
content/uploads/2018/08/EEA_July_Newsletter.pdf.
70 In mid-October 2017 JPMorgan doubled down on its Ethereum investment, announcing the Interbank
Information Network using the Ethereum-based Quorum. https://www.cnbc.com/2017/10/16/jpmorgans-dimon-
betting-on-blockchain-even-as-he-calls-bitcoin-stupid.html. Meanwhile, Ripple CEO Brad Garlinghouse noted to
CNBC around this time: “The global payments industry really has been ruled by an oligopoly, led by players
like JPMorgan and Citi.” https://www.cnbc.com/2017/10/10/ripple-has-over-100-clients-as-mainstream-finance-
warms-to-blockchain.html.

counsel Matt Corva, deputy general counsel Berarducci, and EEA LIWG chair Aaron Wright:
As we discussed, we remain very interested in engaging in discussions with
regulators . . . and probably the most important body is the SEC. . . . [W]e are . . .
eager for our ecosystem to be able to operate in the United States with greatly
reduced uncertainty. . . . [W]e would be very interested in speaking with relevant
parties at the SEC so that we can offer ourselves as an educational resource . . . and
so that we can talk through how certain plans that we have regarding novel
security structures[] might be perceived by your colleagues. If you could help us
navigate and make appropriate introductions, we would be appreciative. 71
Barnett forwarded Lubin’s email to Hinman, writing: “Joe is reaching out to the regulatory
world to provide help and pursue constructive discussion[.]” 72
Three days later, on November 30, 2017, ConsenSys publicly announced that it was
launching what it called “The Brooklyn Project.”73 The announcement described it as “a
company and industry-wide initiative to help fulfill the promise of tokenization by addressing
head-on and — we hope — solving the issues that some regulators and others have raised over
the last year regarding token launches.” 74 Further, it noted: “This project will be our top priority,
and we will accordingly shift resources to this project for at least the next month or two before
resuming execution of token launches.” 75 The announcement concluded:
[T]here still remains much uncertainty around the globe about the precise
boundaries between and best ways to sell security and consumer tokens. Helping
to reduce this uncertainty is central to The Brooklyn Project’s mission, as is
providing market participants and regulators with powerful tools to protect
consumers and enhance the integrity of token-based networks. Just as we have in
the past . . . , we will and already have begun to work with . . . regulators . . . to
achieve our goal of . . . promoting . . . new solutions. 76
Berarducci, the former law associate of Clayton’s, was named the Co-Chair of the
Brooklyn Project. He later explained: “The Brooklyn Project . . . started . . . in response to the
increasing rhetoric from regulators and others regarding concerns about things that were
happening in the blockchain technology industry, in particular, related to the sales of tokens.” 77
On December 4, 2017, Hinman responded to Barnett’s November 27, 2017 email,
writing that while his reply from an airplane didn’t go through the prior week, he was “[h]appy
to participate in a meeting on this topic.”78 The SEC meeting with ConsenSys was scheduled for
December 13, 2017.79
In the meantime, on December 11, 2017, Chairman Clayton released a “Statement on
Cryptocurrencies and Initial Coin Offerings.”80 The statement noted: “It has been asserted that
cryptocurrencies are not securities and that the offer and sale of cryptocurrencies are beyond the
71 https://www.documentcloud.org/documents/23896077-11-hinman-emails-intro-to-joe-lubin-and-consensys-
information at 2 (emphasis added).
72 Id. at 3-4.
73 https://consensys.io/blog/announcing-the-brooklyn-project-for-token-launches.
74 Id.
75 Id.
76 Id.
77 https://engagedscholarship.csuohio.edu/cgi/viewcontent.cgi?article=4022&context=clevstlrev at 8.
information.
information.
80 https://www.sec.gov/newsroom/speeches-statements/statement-clayton-2017-12-11.

SEC’s jurisdiction. Whether that assertion proves correct with respect to any digital asset that is
labeled as a cryptocurrency will depend on the characteristics and use of that particular asset.” 81
The next day, on December 12, 2017, ConsenSys emailed background materials to the
SEC,82 which were emailed to Hinman.83 The email made clear that Lubin would be
accompanied by a former Sullivan & Cromwell attorney (Berarducci) and mentioned the
Enterprise Ethereum Alliance and the EEA LIWG. 84
On December 13, 2017, Hinman and other SEC officials met with Lubin, Berarducci,
ConsenSys general counsel Matt Corva, and EEA LIWG chair Aaron Wright. 85 ConsenSys’s
PowerPoint presentation that day specifically highlighted the Enterprise Ethereum Alliance,
which Hinman would later claim he didn’t learn of until after he left the SEC. 86 It highlighted six
members of the Alliance—multiple of which were Simpson Thacher clients.
The slide deck it concluded with a slide labeled “On-going Collaboration,” which noted
ConsenSys’s goals of:
 Input from regulators so we can properly account for concerns from a range of
market participants. We are pleased to see the latest SEC releases on the
subject, including Chairman Clayton’s recent statement.
 Establishing an ongoing dialogue between industry and SEC to increase the
flow of information and provide updates on developments. 87
After the meeting, SEC Corporation Finance Division official Amy Starr emailed Corva:
[W]e wanted to express our great appreciation for your willingness to share with us
today and on an ongoing basis. We may be interested in having further discussions
with you about the [redacted] and the circumstances in which you may view a token
as not being a security. If you have availability to chat perhaps later this week that
would be great.88
The next day, at Berkeley University panel, Corva stated: “What we’re really focused on is
. . . building an Alliance with other blockchain companies, law firms, . . . and regulators.
We’ve had some talks with the folks at the SEC about this.” 89
ConsenSys’s hope for an “alliance” with regulators wasn’t just empty talk. ConsenSys had
a second meeting with Hinman and SEC staff on December 20, 2017, less than a week after the
first.90 Late the night before, Corva emailed a four-page white paper to the SEC, writing: “While
81 Id.
82 https://www.crypto-law.us/wp-content/uploads/2021/08/Exhibit-B-to-SEC-Motion-Redacted-Version-of-
Hinman-Deposition-08172021.pdf at 29-31.
information at 3.
84 Id.
85 Id.
86 Id. at 20. When asked in a 2021 deposition whether he was familiar with the Alliance, Hinman claimed: “Since I
left the SEC I became aware of it.” https://www.crypto-law.us/wp-content/uploads/2023/06/Part-1.pdf at 42.
Hinman also claimed not to recall the slide deck. https://www.crypto-law.us/wp-
content/uploads/2021/08/Exhibit-B-to-SEC-Motion-Redacted-Version-of-Hinman-Deposition-08172021.pdf at
33. The records regarding the December 20, 2017 meeting had not yet become public at the time of the deposition,
and are not referenced in the Hinman deposition transcripts public at this time.
information at 39.
88 https://storage.courtlistener.com/recap/gov.uscourts.nysd.551082/gov.uscourts.nysd.551082.831.62.pdf at 5.
89 See https://x.com/digitalassetbuy/status/1436034898469470209 (emphasis added).
90 https://www.documentcloud.org/documents/23901361-12-hinman-emails-dec-20-2017-meeting-materials-
from-consensys at 1.

we think this [document] might be helpful to guide the conversation, we’re certainly open to any
format your side finds most useful to you.”91
The white paper, titled “Exploring Tokes That May Not Be Securities,” read: “In our
view, whether a consumer token implicates the U.S. federal securities laws largely will depend on
analyzing both the rights or other functionality a token provides its holder (i.e., its intrinsic
properties), as well as other factors such as the manner of sale (i.e., its extrinsic properties).” 92 It
outlined the idea of “Consumer Tokens” and “User Activity Tokens.” 93
Other than Corva’s email, which along with ConsenSys’s white paper was forwarded to
Hinman the morning of December 20, 2017, the SEC has inexplicably produced no calendar
invite or notation of who actually attended the meeting with Corva—either from the SEC or
ConsenSys, the EEA LIWG, or the Brooklyn Project. Nor again has the SEC publicly produced
any notes from the meeting.
After the meeting, Corva emailed Starr: “[M]any thanks for another great meeting. . . .
[W]e’re thrilled with the engagement and couldn’t be happier to have a dialogue in terms of next
steps. . . . Perhaps we can set another meeting in early January?” 94
In the last week of December 2017, XRP surpassed Ether for a time as the second largest
in the market.95
CLAYTON’S REGULATORY CAPTURE
It is unknown who else at the SEC received ConsenSys’s white paper, such as Clayton, or
whether Clayton and Hinman discussed in late December 2017 or early January 2018 the
ConsenSys meetings, at least one of which included Clayton’s former associate at Sullivan &
Cromwell, Patrick Berarducci, now Co-Chair of the Brooklyn Project.
On January 22, 2018, Clayton gave a speech at the Securities Regulation Institute in
which he declared: “Market professionals, especially gatekeepers, need to act responsibly and
hold themselves to high standards. To be blunt, from what I have seen recently, particularly in
the initial coin offering (‘ICO’) space, they can do better.”96 Clayton specifically explained “ICOs
where the lawyers involved appear to be, on the one hand, assisting promoters in structuring
offerings of products that have many of the key features of a securities offering, but call it an
‘ICO,’ which sounds pretty close to an ‘IPO.’”97 Clayton concluded: “I have instructed the SEC
staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities
laws and the professional obligations of the U.S. securities bar.” 98
Two days later, on January 24, 2018, Clayton spoke at Stanford University. Despite the
harsh rhetoric in Clayton’s public speeches, Perkins Coie partner Lowell Ness later recounted
that after the Stanford speech, Clayton “made his way over to see Andreesen Horowitz the next
morning.”99 Andreesen was the largest venture capital firm in the crypto space—and heavily
invested in Ether. In 2016 they had joined Union Square Ventures and others in investing $10
million in cryptocurrency hedge fund Polychain Capital. 100 Polychain Capital reportedly went
91 Id.
92 Id. at 2.
93 Id.
94 https://storage.courtlistener.com/recap/gov.uscourts.nysd.551082/gov.uscourts.nysd.551082.831.62.pdf at 10-
11.
95 https://www.cnbc.com/2017/12/29/ripple-soars-becomes-second-biggest-cryptocurrency-by-market-cap.html.
96 https://www.sec.gov/newsroom/speeches-statements/speech-clayton-012218.
97 Id.
98 Id.
99 https://x.com/digitalassetbuy/status/1440860750226935816.
100 https://www.coindesk.com/markets/2016/12/09/a16z-usv-invest-10-million-in-blockchain-token-trading-

“all in” on Ether that year101—and in 2017 delivered a 2031% return.102 In the spring of 2017
Andreesen secretly joined several of the same investors in backing cryptocurrency hedge fund
MetaStable Capital, another investor in Ether.103
According to Ness, when Clayton visited Andreesen on January 25, 2018, he “invited
Chris Dixon to round up the . . . industry players who were really kind of trying to do it the right
way and ask for a couple of things: One, essentially, lay out in a very detailed written, footnoted
memo what existing law says about utility tokens, and two, give us a proposal for where to go
from here.”104 It is unknown whether Clayton specifically discussed with Dixon Ether or
Ethereum.
Representing Andreesen in all of its cryptocurrency investments was Lowell Ness at
Perkins Coie—the firm in the EEA LIWG that had been working as counsel to the Enterprise
Ethereum Alliance since its creation.105 Thus, Ness would later recount, “I got the chance to be
the one to write all that stuff [requested by Clayton]. . . . I pulled in Cooley [Godward, another
law firm in the EEA LIWG] and I pulled in a couple other law firms so we’ve now got a nice little
working group of law firms that are in the space that are doing this.” 106 Ness also involved the
other venture capital firm heavily invested in Ether, Union Square Ventures. The group began
calling themselves the “Venture Capital Working Group.”107
On February 6, 2018, the Senate Committee on Banking, Housing, and Urban Affairs
held a hearing on virtual currencies. Clayton declared in his opening statement: “Proponents of
[blockchain] technology assert that it will bring great efficiencies to our national and global
economies, including our capital markets. I hope that it does. And the Commission looks forward
to working with market participants who seek to bring efficiencies, including more effective
oversight, to our markets.”108 Clayton added: “A note for professionals in these markets: Those
who engage in semantic gymnastics or elaborately structured exercises in an effort to avoid
having a coin be a security are squarely within the crosshairs of our Enforcement Division.” 109
Later, Senator Mark Warner stated: “[W]e are focusing a lot on Bitcoin . . . . But you have
got a whole new platform called ‘Ethereum’ . . . . I am not sure what kind of assets those fall into?
Are they potentially regulated within your realm?”110 Clayton reiterated the basic definition of a
security. Then Senator Warner asked: “[C]ertain ICOs the SEC has not stopped; others they have
stopped. Are you going to go back and re-review the ones that have gone forward?” Clayton
sidestepped the question.111
firm; https://siliconangle.com/2016/12/11/cryptocurrency-fund-polychain-capital-raises-10m-andreessen-
horowitz-union-square; https://www.coindesk.com/markets/2017/04/17/millions-in-minutes-how-polychain-
makes-sense-of-the-ico-wild-west.
101 https://www.forbes.com/sites/stevenehrlich/2022/02/08/how-cryptos-original-bubble-boy-rode-ethereum-
and-is-now-pulling-the-strings-of-the-defi-boom.
102 https://qz.com/1593982/crypto-investors-andreessen-horowitz-and-polychain-are-heading-in-opposite-
directions.
103 https://fortune.com/2017/07/26/bitcoin-cryptocurrency-hedge-fund-sequoia-andreessen-horowitz-metastable;
https://cointelegraph.com/news/leading-silicon-valley-vcs-sequoia-capital-and-andreessen-horowitz-invest-in-
blockchain-hedge-fund.
105 Id.
106 Id.
107 See https://media.venturecapitaljournal.com/uploads/2018/04/safe_harbor_discussion_final.pdf. By contrast,
Clayton told Ripple in an August 20, 2018 meeting that it was not a “proper forum” for discussing that Ripple was in
“purgatory” due to uncertainty as to whether XRP was a security.
https://storage.courtlistener.com/recap/gov.uscourts.nysd.551082/gov.uscourts.nysd.551082.831.135_1.pdf.
108 https://www.congress.gov/115/chrg/CHRG-115shrg28854/CHRG-115shrg28854.pdf at 8.
109 Id. at 9.
110 Id. at 28.
111 Id.

On February 14, 2018, ConsenSys deputy general counsel Berarducci gave a speech in
which he stated:
We are exploring ways to enable industry participants to come up with codes of
conduct, agree to codes of conduct, incentivize industry actors to follow rules that
police the industry, and to identify frauds or people who are not following these
rules. Because there could, potentially, be a cryptoeconomic incentive to follow
these protocols, individuals would receive in exchange the ability to gain some
scarce digital asset and further the goals of regulation. I think of this type of
approach not necessarily as “self-regulation,” but, rather, “collaborative
regulation.”112
In late March the Venture Capital Working Group set a meeting with Hinman and other
SEC officials for March 28, 2018 to discuss the document Clayton had quietly requested from
Andreesen Horowitz on January 25, 2018.
Two days in advance of the meeting, Ness sent the SEC the Venture Capital Working
Group document, although the SEC has never made public any records regarding the transmittal.
The document was titled “Token Sale Non-Exclusive Safe Harbor.” 113 The proposal’s
introduction read:
We believe the law and guidance around what constitutes an investment contract
should be clarified. We believe that the industry’s and the regulators’ interests are
aligned in establishing clear rules and appropriate investor protections so that
capital formation in blockchain technology is not derailed and development can
continue to flourish in the United States.114
Yet the proposal only referenced one specific token: Ether. It stated in a footnote:
ETH is a good example of this type of protocol token that has become so
decentralized it should not be deemed a security. For clarity, ETH is the protocol
token for the Ethereum network, so this safe harbor provision would apply to ETH,
but not necessarily to all ERC20 tokens running on top of the Ethereum network
unless an ERC20 token is itself a protocol token.115
At least one Venture Capital Working Group member apparently disagreed with the
footnote regarding Ether. In a conference later that year, Cooley partner Nancy Wotjas stated:
“What’s interesting is, I don’t think Ether is decentralized. I think it’s fully functional, but I don’t
think it’s decentralized.”116
The meeting between Hinman and other SEC officials and the Venture Capital Working
Group took place on March 28, 2018.117 The participants included individuals from Andreesen;
Union Square Ventures, the other hedge fund with significant investment in Ether; the National
Venture Capital Association; and attorneys from three firms: Enterprise Ethereum Alliance
counsel and EEA LIWG member Perkins Coie (including document author Lowell Ness), EEA
LIWG member Cooley Godward, and McDermott Will Emery.118 Two law professors also joined
by phone.119
112 https://engagedscholarship.csuohio.edu/cgi/viewcontent.cgi?article=4022&context=clevstlrev.
113 https://media.venturecapitaljournal.com/uploads/2018/04/safe_harbor_discussion_final.pdf.
114 Id. at 1.
115 Id. at 4 fn. 8.
117 https://s3.documentcloud.org/documents/23896040/sec_emailrelease.pdf at 22.
118 Id.
119 Id.

According to Ness, “The general reception I think we got when we visited the SEC . . .
was actually really positive. And it was an interesting dichotomy between their public-facing . . .
incredibly vituperative statements that they were making and this interesting . . . welcome that
we got privately.”120 Ness concluded: “I think they’re looking for industry to help solve this
problem.”121
Just one week after Clayton received the written proposal he had requested from
Andreessen Horowitz, he adopted its reasoning in an April 5, 2018 speech at Princeton
University: “What we find in the regulatory world [is that] the use of a . . . token evolves over
time. The use can evolve toward or away from a security.”122 News publications later noted it was
the first time “Clayton appeared to signal an openness to a fluid legal definition for digital
tokens.”123
And on April 12, 2018, two weeks after the SEC met with the Venture Capital Working
Group, Hinman emailed Lubin: “I greatly enjoyed meeting you and your team at our offices a
couple of months ago. I was wondering if we could have a brief call in order to discuss the
possibility of another meeting with you?”124 Lubin responded asking whether the call should just
be one-on-one or whether to include ConsenSys’s internal legal team “who have been in
discussions with you and your colleagues.”125 It is not clear from Lubin’s email or from the
public records available whether Lubin was referencing additional discussions since the
December 2017 meetings. Hinman replied: “Call is just to set up a possible meeting . . . to learn
more about the Ethereum support network . . . . I can give you more background on a call if you
like.”126
The same day, on April 12, 2018, the SEC added XRP to its “Watch List,” a list of entities
potentially subject to supplemental ethics rules.127
On April 18, 2018, Commissioner Pierce met with the Venture Capital Working Group,
just as Hinman had.128 That same day, Politico published the first public reporting of the
Venture Capital Working Group’s March 26, 2018 proposal. 129 A story in The New York Times
the next day titled “Venture Capitalists Seek ‘Safe Harbor’ for Virtual Currencies” first reported
the March 28 meeting Andreessen Horowitz organized with the SEC. 130 According to the story:
Regulators have indicated in private meetings that they are considering whether
virtual currencies — including Ether, the second most widely used digital token —
should be categorized as a security, according to three people who have been in the
meetings. That designation could cause a significant drop in the value of Ether. 131
On April 23, 2018, Hinman had the call he had arranged with Lubin. 132 In the call,
121 Id.
122 https://www.coindesk.com/markets/2018/04/05/sec-chief-touts-benefits-of-crypto-regulation; see also
https://jrc.princeton.edu/news/sec-chairman-cryptocurrencies-and-initial-coin-offerings.
123 https://www.politico.com/story/2018/04/18/venture-capital-firms-seek-regulatory-shelter-for-digital-token-
startups-493293.
124 https://www.documentcloud.org/documents/23901352-13-hinman-emails-apr-2018-hinman-approaches-
lubin-for-call-about-ethereum-set-up-may-call-with-buterin at 2.
125 Id. at 1-2.
126 Id. at 1.
127 https://casetext.com/case/sec-exch-commn-v-ripple-labs-inc-5.
128 https://s3.documentcloud.org/documents/23896040/sec_emailrelease.pdf at 23.
129 https://www.politico.com/story/2018/04/18/venture-capital-firms-seek-regulatory-shelter-for-digital-token-
startups-493293.
130 https://www.nytimes.com/2018/04/19/technology/virtual-currency-securities.html.
131 Id.
132 https://www.documentcloud.org/documents/23901352-13-hinman-emails-apr-2018-hinman-approaches-

Hinman apparently requested Lubin’s assistance in setting up a meeting with Ethereum co-
founder Vitalik Buterin.133 It is unknown what further information Hinman provided Lubin, or
whether Hinman and Lubin kept in touch after that. Yet from that date forward, Lubin spoke
with great certainty about what the SEC might say about Ether.
On April 26, 2018, the House Committee on Appropriations’ Financial Services and
General Government Subcommittee had a hearing with Clayton. Clayton testified:
A pure medium of exchange, the one that’s most often cited, is Bitcoin. As a
replacement for currency, that has been determined by most people to not be a
security. Then there are tokens, which are used to finance projects. I’ve been on the
record saying there are very few—there’s none that I’ve seen—tokens that aren’t
securities.134
On April 28, 2018, the House Committee on Financial Services had a hearing with
Hinman. Representative Tom Emmer asked Hinman: “How can we improve the regulatory
clarity for entrepreneurs here in the United States so that their contribution to something that
may not be a security will not see enforcement actions by the SEC?” 135 Hinman responded: “One
of the things we are doing is meeting with the participants who have these ideas, that
think that they may have a token that shouldn’t be regulated as a security, to work
through with them how that may be structured.”136 Yet despite XRP being the third largest
token, the SEC was having no such meetings with Ripple regarding XRP, which it had just added
to its Watch List that month.
On May 1, 2018, The Wall Street Journal added to the reporting that regulators were
looking at Ether: “Bitcoin has largely escaped government oversight, but regulators are
examining whether other widely traded cryptocurrencies should be regulated as securities,
according to people familiar with the matter.”137 The story continued:
Some regulators think ether is in a “gray zone,” but believe its creation in 2014 was
probably an illegal securities sale, the people said. Silicon Valley backers such as
venture-capital firm Andreessen Horowitz disagree, saying no particular person or
entity stands behind ether or is responsible for driving its value.138
Yet on May 3, 2018, an SEC staffer emailed Hinman an outline of a speech titled “When
does a security stop being a security,” with the subject line: “First stab at the digital asset security
morphing issue.”139
On May 10, 2018, Fox News Correspondent Charlie Gasparino tweeted: “Through an
organization known as the ‘The Brooklyn Project’ . . . Blockchain/Crypto business seeks to create
the first Self Regulatory Organization sanctioned by [the SEC].”140 He repeated the information
on The Claman Countdown. In response, the Brooklyn Project tweeted: “Big correction: We are
building frameworks and tools to help the industry self-regulate based on voluntary consent and
inclusive, transparent coordination. Not SEC sanctioned, and no current plans for a sanctioned
organization.”141 Seven minutes later Gasparino tweeted back that Andrew Keys had “said the
lubin-for-call-about-ethereum-set-up-may-call-with-buterin at 4.
133 See id. at 6.
134 https://www.coincenter.org/sec-chairman-clayton-bitcoin-is-not-a-security.
135 https://www.congress.gov/115/chrg/CHRG-115hhrg31435/CHRG-115hhrg31435.pdf at 25.
136 Id.
137 https://www.wsj.com/articles/worlds-second-most-valuable-cryptocurrency-under-regulatory-scrutiny-
1525167000.
138 Id.
139 https://storage.courtlistener.com/recap/gov.uscourts.nysd.551082/gov.uscourts.nysd.551082.831.136_1.pdf.
140 https://x.com/CGasparino/status/994660857362763776.
141 https://x.com/TheBKP_Official/status/994672145874718720.

goal was to be an SEC sanctioned self regulator.”142
On May 17, 2018, Lubin said in an interview: “We’re very confident that we understand
how to do that without regulatory bodies considering those tokens securities.” 143
On May 21, 2018, ex-JPMorgan official Tom Lee stated on CNBC that “Ethereum is
likely to be viewed as a utility token” by the SEC (and therefore not a security). 144
On May 22, 2018, ConsenSys general counsel Matt Corva emailed Vitalik Buterin and
several three other individuals from the Ethereum Foundation, introducing them to Hinman’s
Senior Special Counsel Michael Seaman and confirming that all would be on a video call the next
morning.145 Corva copied EEA LIWG Chair Wright and Brooklyn Project Co-Chair Berarducci,
writing “one of us would like to join if the Staff is amenable with us serving as a familiar face for
both sides . . . .”146 The SEC apparently provided a list of questions in advance of the call.147
But the next morning, one of the Ethereum Foundation board members emailed the
group: “Our sincerest apologies, but due to unforeseen circumstances, we’re going to need to
postpone this video conference. We’ll reach out again as soon as we can reschedule.” 148 Corva
responded to Seaman alone, which Seaman forwarded to Hinman:
My apologies . . . . I thought we were all systems go. Let us do some gentle digging
on what happened and see what we can try to do to get this back on course. If I had
to guess, someone on their side is too caught up in a world of WSJ and CoinDesk
stories and they haven’t had the personal interaction we’ve had with Staff to
appreciate the thoughtful process . . . . Please send my apologies to Bill and the rest
of the team. We know this is important and remain committed to being as helpful
as we can.149
The following day, on May 24, 2018, Lubin was interviewed about “the conversations
you’re having with regulators at the moment.”150 He declared:
We’re mostly focused on securities law. We are able to issue investor tokens, or
tokenized securities. We’re also able to issue consumer utility tokens that wouldn’t
be considered securities, and we’re focused on getting very clear definitions and
helping regulators around the world understand . . . . As long as these projects are
selling tokens to token buyers that make use of the token, and they’re not selling in
large quantities to speculators who are hoping to make money from the actions of
others, that is a good clean definition of a consumer token. 151
Similarly, in a May 28, 2018 interview, Lubin laid out an enormous amount of detail
about “the SEC’s opinion” that the public was not privy to:
We have many different projects that are consumer utility tokens and would not be
considered securities. Even in this context, at this point in time there’s a lot of
142 https://x.com/CGasparino/status/994673687382151168.
145 https://www.documentcloud.org/documents/23901353-14-hinman-emails-may-2018-call-w-buterin-canceled-
ask-to-reschedule at 3-4.
146 Id.
147 See https://www.documentcloud.org/documents/23901355-16-hinman-emails-emails-confirming-jun-8-2018-
call-with-buterin-6-days-before-speech at 2.
148 Id. at 2.
149 Id. at 1.
151 Id.

uncertainty and doubt that has been raised by regulators around the world. The
SEC has made certain pronouncements about consumer tokens or utility tokens.
Early statements were to the effect that all these tokens are probably securities.
. . . So the SEC has this dilemma . . . . The problem is that there are a lot of great
projects, there are a lot of bad projects, a lot of fraudulent projects, a lot of projects
that are selling what could and should be good well-constructed consumer utility
tokens, but they’re selling them to investors in enormous quantities, in quantities
far greater than they could actually use. So they’re really selling them as an
investment. And so, the SEC’s opinion, from what we’ve discerned, is that those
things constitute securities. So we have a framework that enables us to sell
consumer utility tokens, not in enormous quantities, not with discounts for large
investors, not to investors—you essentially have to be a technically-accredited
token buyer. You have to answer questions, you have to demonstrate that you will
use these tokens on these platforms. And so that’s a good clean way to sell a token
that represents some sort of access or consumption of a resource on these new
business models, these network business model platforms. 152
Lubin also seemed to call for specific action from the SEC: “We certainly need bodies like the
SEC to scare many projects straight, to create the context of concern so that many different
projects think twice and do their legal homework before releasing a token.” 153
HINMAN ANNOUNCES ETHEREUM’S FREE PASS
On Monday, June 4, 2018, Hinman sent an email with the subject line “Ether speech” to
SEC senior staff, including Clayton’s chief of staff Lucas Moskowitz and deputy chief of staff
Sean Memon.154 In the email, Hinman wrote:
Attached please find a draft of the speech I had mentioned, which suggests that we
do not need to see a need to [sic] regulate Ether, as it is currently offered, as a
security. That language is in brackets and would be used if we are all in agreement.
We also have a call with Buterin later this week to confirm our understanding of
how Ethereum Foundation Operates.155
His email to colleagues did not identify his financial interest in Simpson Thacher or its
participation in the EEA LIWG.
The draft speech began:
There has been considerable discussion recently in the press and at legal
conferences regarding whether a digital asset offered as a security can over time
become something other than a security. . . . I think a better line of inquiry is: “Can
a digital asset or token that was originally offered in a securities offering ever be
sold in a manner that does not constitute a securities offering?” 156
The key language about Ether “in brackets” in the draft read: “[B]ased on our understanding of
the present state of Ether and the Ethereum network, regulating Ether as a security does not
seem to be warranted.”157 Again, Hinman’s speech did not identify his financial interest in
Simpson Thacher.
154 https://www.documentcloud.org/documents/23901354-15-hinman-emails-june-4-2018-hinman-circulates-
draft-speech-and-says-have-call-with-but-re-ether.
155 Id.
156 Id. at 2.
157 Id. at 7.

On Tuesday, June 5, 2018, Memon forwarded the draft speech to Clayton. 158
That same day, Mike Novogratz, a former roommate and close friend of Lubin’s who
bought 500,000 ETH from Buterin in 2015, 159 stated at a conference: “I’d bet dimes to donuts
[the SEC] will say ‘Ethereum probably was a security, but it’s not anymore.’” 160
On Friday, June 8, 2018, Hinman and other SEC officials had a video conference with
Buterin and other Ethereum Foundation officials, as well as Ethereum Foundation their
attorneys.161 Although the SEC has not made public its transmittal, the SEC had provided
Buterin in advance with a list of questions, which the SEC agreed to stick to in the call. 162
The SEC’s first question was about the early days of Ethereum development—something
Hinman brushed aside in his speech. 163 The other questions were more technical, but the final
question was extremely subjective: “Do you feel that there is a good correlation between the
price/value of Ether and the value of its utility?”164
After the Ethereum Foundation meeting, Hinman and Corporation Finance Division
officials apparently met that afternoon with the SEC’s Office of General Counsel (“OGC”). 165
Near the end of the day, Hinman’s Senior Special Counsel Michael Seaman emailed OGC
attorneys the most recent version of Hinman’s draft speech, writing: “Based on our
understanding of the present state of Ether and the Ethereum network and how it operates,
regulating the offer and sale of Ether as a security would not appear to further the policy
objectives of the securities laws.”166
OGC attorney Laura Jarsulic emailed in response: “Attached are our comments for the
draft that you circulated last week . . . . We haven’t updated the comments to take into account
what we learned from you today.”167 Regarding the statement on Ether in Hinman’s draft
speech, OGC wrote in the document’s comments: “We are still discussing this internally. We also
want to hear what [Corporation Finance] learns from its anticipated conversation with
Buterin.”168
On Monday, June 11, Coinbase unexpectedly announced it would be listing Ethereum
Classic on its exchange.169 As Forbes Magazine noted four days later: “Coinbase, which has been
careful not to list any cryptocurrencies that might be a security, would likely only add Ethereum
Classic if it was sure Ethereum and its kin had officially escaped the label.” 170
On Tuesday, June 12, SEC OGC attorney Laura Jarsulic emailed Stephanie Szczepanik
comments on the Friday draft of Hinman’s speech. 171 The comment regarding Ether read: “We
158 https://www.crypto-law.us/wp-content/uploads/2023/06/830-151.pdf.
159 https://blockchain.news/news/mike-novogratz-500-000-ethereum-vitalik-buterin-2015.
161 See https://www.documentcloud.org/documents/23901355-16-hinman-emails-emails-confirming-jun-8-2018-
call-with-buterin-6-days-before-speech at 1.
162 See id. at 2.
163 Id.
164 Id.
165 See https://www.crypto-law.us/wp-content/uploads/2023/06/156.pdf at 2.
166 Id.
167 Id.
168 Id. at 8.
169 https://www.coinbase.com/blog/adding-ethereum-classic-support-to-coinbase.
170 https://web.archive.org/web/20180615233905/https://fortune.com/2018/06/15/the-ledger-ethereum-
cofounder-on-sec-blessing-tethers-bitcoin-domination-ripple-vs-stellar-lumens/; see also
https://modernconsensus.com/cryptocurrencies/ethereum/coinbase-ethereum-classic-sec.
171 https://www.crypto-law.us/wp-content/uploads/2023/06/830-152.pdf.

still have reservations about including a statement directly about Ether in the speech. Even with
the caveats in the sentence, it seems it would be difficult for the agency to take a different
position on Ether in the future.”172
On Wednesday, June 13, the SEC circulated a memo discussing whether XRP was a
security.173 To this day, the memo has not been made public.
On Thursday, June 14, Hinman delivered his speech at the Yahoo Finance All Markets
Crypto Summit in San Francisco, California. 174 As Lowell Ness would later note, the speech
“tracks my [March 26] memo pretty well”;175 it has ultimately come to be known as Hinman’s
“free pass” speech for Ether.176 Once again, Hinman failed to disclose in the speech his financial
interest in a member of the Enterprise Ethereum Alliance.
When Lubin followed Hinman on stage, the interviewer asked Lubin, “What do you
think’s going to happen to Ripple with this new ruling?” Lubin’s response suggested he had read
parts of Hinman’s speech in advance: “I don’t know the answer to that. . . . I wasn’t able to read
through Bill’s entire speech, and I wasn’t here. I don’t know . . . if he spoke about XRPs at
all . . . .” When the interviewer clarified, “He didn’t specifically mention anything about it,”
Lubin replied, “That’s interesting.”177
The same day, Hinman repeated his points in a press interview. 178 Ether’s value rose 11%
by close of day.179
On June 21, 2018, Clayton appeared for an oversight hearing before the House
Committee on Financial Services. In his testimony, Clayton specifically endorsed Hinman’s
speech regarding Ether, stating: “Our Corporation Finance Division Director recently further
outlined the approach staff takes to evaluate whether a digital asset is a security.” 180
Four days later, on June 25, 2018, Andreesen Horowitz—from which Clayton had
solicited the rationale Hinman ultimately used in his “free pass” speech—announced the launch
of a $350 million venture fund that would invest exclusively in crypto companies and
protocols.181 The fund was founded and led by Chris Dixon, 182 the Andreesen partner Clayton
made the request of on January 25, 2018.
HINMAN’S MEETING WITH LIN
As described above, Hinman continued throughout his tenure at the SEC to disregard the
ethics counsel he had received. Documents demonstrate meetings with Simpson Thacher partner
Joshua Bonnie on September 6, 2018; September 18, 2019; and September 17, 2020.
172 Id. at 11.

173 https://x.com/JohnEDeaton1/status/1447400538308481030.
174 https://www.sec.gov/newsroom/speeches-statements/speech-hinman-061418.
176 See https://www.crypto-law.us/the-ethereum-free-pass-fair-notice-and-the-fight-ahead.
178 https://www.youtube.com/watch?v=CF-_0LeL8pk.
179 https://finance.yahoo.com/news/u-sec-official-says-ether-202107751.html.
180 https://financialservices.house.gov/uploadedfiles/hhrg-115-ba00-wstate-jclayton-20180621.pdf at 15.
Similarly, in an August 29, 2018 speech in Nashville, Tennessee, Clayton stated: “Bill [Hinman] recently outlined
the approach we take to evaluate whether a digital asset is a security, and I encourage you to take a look at Bill’s
speech.” https://x.com/nerdnationunbox/status/1485807893895131139?s=12. The SEC transcript of the speech
changed Clayton’s statement from “the approach we take” to “the approach staff takes.” See
https://www.sec.gov/newsroom/speeches-statements/speech-clayton-082918.
181 https://a16z.com/introducing-a16z-crypto.
182 https://a16z.com/author/chris-dixon; https://www.nytimes.com/2018/06/27/business/dealbook/blockchain-
stars.html.

Another of Hinman’s partners at Simpson Thacher, Chris K.H. Lin from the firm’s Hong
Kong office, represented Canaan, Inc., a Chinese company producing cryptocurrency mining
equipment primarily for Bitcoin and Ether (not XRP). On July 23, 2019, Lin confidentially
submitted a draft registration statement to the SEC for a U.S. IPO. 183
On the morning of August 5, 2019, Lin emailed Hinman requesting a meeting on August
21. Lin wrote: “I thought I should pay you a visit while I am in town to report what is going on in
China.” Hinman forwarded the email to several people in his office that morning, one of whom
replied: “To clarify – is this a meeting you want to take? You have time and I can set it up with
Chris.” Hinman responded, “I will reply to him.”
On the morning of August 19, 2019, Lin sent Hinman another email requesting to meet
the afternoon of August 22.184 Hinman confirmed the appointment at the SEC building. That
same day, the SEC issued correspondence to Canaan requesting additional documents related to
their registration.185
SEC visitor logs confirms that Lin arrived at 3:10 PM on August 22, 2019. 186 Given his
financial interest in Simpson Thacher, it is difficult to imagine how Hinman would not have
known that this meeting violated his ethics agreement. Canaan’s November 21, 2019 IPO on
NASDAQ would raise $100 million.187
SEC INVESTIGATION OF RIPPLE AND XRP
In February 2020, press accounts reported that JPMorgan was in talks with ConsenSys
regarding ownership of JPMorgan’s Ethereum-based product Quorum. 188 The deal closed on
August 25, 2020,189 with Sullivan & Cromwell representing ConsenSys. 190 But according to a
later lawsuit, on August 14, 2020, ConsenSys transferred “fundamental intellectual property and
subsidiaries” to a new entity in which JPMorgan had a 10% stake. 191
December 4, 2020 was Hinman’s last day at the SEC. 192 On January 12, 2021, Simpson
Thacher announced Hinman’s return as a partner.193 Hinman had received approximately $5.6
million from Simpson Thacher while serving as an SEC official. 194
On December 16, 2020, Bloomberg published an article titled “Bitcoin Whale Emerges
183 https://www.sec.gov/Archives/edgar/data/1780652/000095012319006580/filename1.htm; see also

https://www.coindesk.com/markets/2019/11/14/bitcoin-miner-maker-canaan-sets-100-million-target-for-us-ipo.
184 https://s3.documentcloud.org/documents/23896182/3-2019-08-19-22-chris-lin-hinman-email-and-
arrival.pdf; see also https://www.law360.com/articles/1219889.
185 https://www.sec.gov/Archives/edgar/data/1780652/000000000019012633/filename1.pdf.
186 https://s3.documentcloud.org/documents/23896182/3-2019-08-19-22-chris-lin-hinman-email-and-arrival.pdf
at 3.
187 https://www.bloomberg.com/news/articles/2019-11-21/bitcoin-mining-company-canaan-raises-90-million-in-
u-s-ipo.
188 https://www.reuters.com/article/us-jp-morgan-blockchain-exclusive/exclusive-jpmorgan-in-talks-to-merge-
blockchain-unit-quorum-with-startup-consensys-sources-idUSKBN2051AW; see also
https://cryptobriefing.com/jpmorgan-lead-consensys-funding-round-with-20-million-investment.
189 https://consensys.io/blog/consensys-acquires-jpm-quorum.
190 https://www.sullcrom.com/About/News-and-Events/Highlights/2020/September/SC-Advises-ConsenSys-in-
Acquiring-Quorum-Enterprise-Blockchain-Platform-from-JPMorgan.
191 https://www.prnewswire.com/news-releases/blockchain-company-consensys-faces-multi-billion-dollar-audit-
as-shareholders-claim-board-breaches-fiduciary-duties---attributed-to-arthur-falls-301493433.html;
https://bitcoinist.com/ethereum-consensys-secretly-sold-business-jp-morgan; https://protos.com/consensys-
lawsuit-jpmorgan-owns-critical-ethereum-infrastructure.
192 https://www.sec.gov/newsroom/speeches-statements/statement-bill-hinman-120420.
193 https://www.stblaw.com/docs/default-source/related-link-pdfs/bill-hinman-rejoins-simpson-
thacher_2021.pdf.
194 https://www.businessinsider.com/sec-simpson-partner-pay-biden-golden-parachutes-2021-1.

With $1 Billion, Alan Howard’s Backing.” 195 It reported that $2.5 billion hedge fund One River
Asset Management had established a new One River Digital Asset Management and quietly
bought more than $600 million in Bitcoin and Ether in November 2020—with commitments
that would bring those holdings to $1 billion by early 2021.196
On December 17, 2020, former SEC Commissioner Joseph Grundfest sent the SEC a
letter stating his view that “a decision to advance enforcement proceedings at this time is highly
problematic[.]”197 Grundfest noted:
The staff has articulated no material distinction between the operation of Ether and
of XRP that is relevant to the application of the federal securities laws. Imposing
securities law obligations on XRP while leaving Ether untouched raises
fundamental fairness questions about the exercise of Commission discretion. . . .
Ether and XRP should be treated similarly.198
On December 22, 2020, the SEC filed a lawsuit against Ripple alleging that its XRP
cryptocurrency was a security.199 The value of XRP fell 25% immediately after the announcement
of the SEC’s lawsuit.
Twelve hours later, on December 23, 2020, Clayton resigned as SEC Chairman. 200 On
March 29, 2021, One River Assets revealed it had hired Clayton as an advisor. 201
On January 12, 2021, the SEC announced that Marc Berger, Acting Director of the
Enforcement Division that brought the lawsuit against Ripple, would depart that month. 202 On
April 15, 2021, Simpson Thacher announced that it had hired Berger. 203
EMPOWER OVERSIGHT REFERRAL TO SEC OIG
Empower Oversight filed its first FOIA request with the SEC on August 16, 2021. 204 The
SEC failed to properly respond to FOIA requests, forcing Empower Oversight to file in
December 2021 the first of several lawsuits against the SEC to force its compliance with FOIA. 205
In February and March 2022, the SEC finally produced some 1,300 pages of records to
Empower Oversight. The records revealed Hinman’s direct financial interest.
Accordingly, on May 9, 2022, Empower Oversight wrote to the SEC OIG requesting a
comprehensive review of the SEC’s ethics officials’ failure to properly manage conflicts of
interest regarding cryptocurrency issues.206 Specifically, the letter asked that the SEC OIG:
195 https://www.bloomberg.com/news/articles/2020-12-16/bitcoin-whale-surfaces-with-1-billion-and-alan-
howard-s-backing.
196 Id.
197 https://www.crypto-law.us/wp-content/uploads/2021/12/FOIA-12092020-Grundfest-Ltr-to-SEC-Commsnrs-
Copy.pdf.
198 Id. at 3.
199 https://www.sec.gov/files/litigation/complaints/2020/comp-pr2020-338.pdf; see also
https://www.sec.gov/newsroom/press-releases/2020-338.
200 https://www.sec.gov/newsroom/speeches-statements/clayton-2020-12-23.
201 https://www.bloomberg.com/news/articles/2021-03-29/ex-sec-chairman-clayton-to-advise-brevan-backed-
firm-on-crypto.
203 https://www.stblaw.com/docs/default-source/related-link-pdfs/marc-berger-to-join-simpson-
thacher_2021.pdf.
204 https://empowr.us/empower-oversight-seeks-information-on-conflicts-of-interest-in-cryptocurrency-at-sec.
205 https://empowr.us/empower-oversight-sues-sec-for-access-to-foia-documents-amid-crypto-conflict-of-interest-
concerns.
206 https://empowr.us/wp-content/uploads/2022/05/2022-5-9-JF-to-SECOIG-Ethics-Office-Referral.pdf.

1) Understand the degree to which the conflicts involving Hinman and Clayton exacerbated
the perception that the SEC’s enforcement actions have selectively targeted some
cryptocurrencies while giving others a free pass;
2) Explain to the public how the SEC’s Ethics Office failed to effectively ensure compliance
with its clear directives; and
3) Evaluate the SEC’s policies and procedures to identify ways to more effectively monitor
compliance with ethics guidance.
On January 31, 2024, an SEC FOIA official informed Empower Oversight that the SEC
OIG had authorized disclosing that it was in the final stages of an investigation into the
matter.207
On July 15, 2024, Empower sent another letter to the SEC OIG urging it to ensure that its
investigation’s scope included former SEC Chairman Jay Clayton, given the financial ties that
may have influenced his actions.208 The letter also asked for clarification about whether the SEC
FOIA official accurately represented the status SEC OIG investigation. 209 To date, the SEC OIG
has not responded.
CONCLUSION
The American people rely on public officials to ensure their decisions are made based on
the interests of the public. Congress has established criminal conflict of interest laws to prevent
self-interested dealing, and they are accompanied by a host of ethics regulations promulgated by
the Office of Government Ethics.
However, if conflict of interest laws and regulations can simply be ignored, regulators can
use their public office to financially benefit themselves and their associates while harming their
competitors. Government regulators should not be picking winners and losers at all in a free
market—much less in a manner that benefits themselves.
Given the seriousness of these apparent conflicts of interest and the importance of the
public being able to trust that the SEC can regulate the cryptocurrency sector impartially in the
future, we respectfully urge that your committees request from the SEC OIG:
1. The current status of the SEC OIG’s investigation;

2. If not completed, an expected timeline for the completion of the report; and
3. If completed, an unredacted copy of the report.
Thank you for your time and attention to these important issues.
Cordially,
/Tristan Leavitt/
Tristan Leavitt
President
Empower Oversight
207 https://empowr.us/confirmed-sec-inspector-general-in-final-stages-of-investigation-on-crypto-conflicts-
referred-by-empower-oversight. The SEC official proposed that Empower accept a copy of the SEC OIG report with
“appropriate redactions” in lieu of searches in response to particular FOIA requests.
208 https://empowr.us/empower-oversight-presses-SEC OIG-on-long-awaited-crypto-conflicts-probe.
209 https://empowr.us/wp-content/uploads/2024/07/2024-07-15-TL-to-SEC-OIG-Clayton-1.pdf.

2024 10 25 Letter To Congress SEC Crypto Conflicts

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2024 10 25 Letter To Congress SEC Crypto Conflicts

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November 15, 2024

VIA ELECTRONIC TRANSMISSION

Chairman Patrick McHenry Ranking Member Maxine Waters

Chairman French Hill Ranking Member Stephen F. Lynch

Chairman Sherrod Brown, Ranking Member Tim Scott

Dear Chairmen and Ranking Members:

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34 https://medium.com/@andrewkeys_88339/ethereum-growing-exponentially-in-china-31f1d24c8ee9; see also

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172 Id. at 11.

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183 https://www.sec.gov/Archives/edgar/data/1780652/000095012319006580/filename1.htm; see also

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1. The current status of the SEC OIG’s investigation;

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