The legal battle between the U.S. Securities and Exchange Commission (SEC) and Ripple Labs, the company behind the XRP cryptocurrency, has been one of the crypto industry’s most controversial and consequential events.
But what if the outcome of this case was influenced by a clever legal strategy that gave Ethereum, Ripple’s main rival, an unfair advantage?
That’s the claim made by John Deaton, the founder of CryptolawUS, a law firm representing XRP holders in a class-action lawsuit against the SEC.
Deaton has uncovered a complex web of connections and conflicts of interest involving former SEC Chairman Jay Clayton, Ethereum co-founder Joseph Lubin, and several other key players with stakes in the digital currency empire.
The Masterstroke of Lubin
According to Deaton, the story begins in 2017, when President Donald Trump nominated Jay Clayton as SEC Chairman.
Clayton was a partner at Sullivan & Cromwell (S&C), a prestigious law firm that represented many Wall Street firms and corporations.
At the same time, Joseph Lubin, one of the co-founders of Ethereum and the founder of Consensys, a blockchain venture studio, quickly hired S&C to represent his interests.
This move was smart and effective, as it guaranteed Clayton’s recusal from any voting related to enforcement actions against one of his law firm’s major clients.
But Lubin did not stop there. He also made S&C partner Robert Rice the deputy general counsel at Consensys and employed several other S&C lawyers.
By doing so, Lubin ensured a tactical advantage over his competitors in the crypto space, especially Ripple.
The Connection Between Clayton and Hinman
Deaton’s investigation also reveals how Clayton reached out to William Hinman, the director of the SEC’s Division of Corporation Finance, who was in charge of overseeing crypto regulation.
Hinman was a partner at Simpson Thacher, another prominent law firm that was a member of the Enterprise Ethereum Alliance, a consortium of companies and organizations that support Ethereum
Clayton suggested meetings with Lubin and Consensys to Hinman and actively inquired about the proceedings.
This connection seems to run deeper, as Clayton asked about the Consensys meetings more than once. It was not just business as usual; it was a web that was only beginning to be untangled.
What adds more spice to this story is Hinman’s association with Simpson Thacher and the profits he received from his law firm after giving speeches that benefited the firm.
In 2018, Hinman delivered a speech that declared that Ethereum was not a security, despite its initial coin offering (ICO) in 2014.
This speech boosted Ethereum’s price and reputation while also benefiting Simpson Thacher’s clients and partners.
The Final Blow Against Ripple
Clayton’s subsequent move to One River Asset Management, a hedge fund that had made a significant bet on Bitcoin (BTC) and Ethereum (ETH), followed by his vote for an enforcement action against Ripple, only thickened the plot.
This resulted in a lawsuit that cost over $200 million to Ripple and its executives, who were accused of selling unregistered securities in the form of XRP.
Despite warnings by Joe Grundfest, a former SEC commissioner who was involved with the Ether founders and warned against the devastating impact on innocent holders, Clayton proceeded with the case.
Grundfest argued that XRP was not a security and that the SEC’s action would harm thousands of investors and innovators in the crypto industry.
The entire unfolding of events highlights a system where the choice of a law firm can be the difference between legal torment and regulatory advantage.
The move by Lubin to hire S&C may have been smart, but it raises questions about the integrity of a system that can be swayed by strategic legal maneuvering.
The connections between Clayton, Lubin, Consensys, and others are not just coincidences; they are a wake-up call.
In the words of a wise man, “Power tends to corrupt, and absolute power corrupts absolutely.”
This is the world of cryptocurrency, where power and money write the rules, and we are all just spectators in a game that seems to have no end!
