Deaton Reveals Intricate Connections in Ripple-SEC Dispute
Key Insights:
- John Deaton exposes “ETH-Gate,” revealing Ethereum’s pivotal role in the Ripple-SEC legal drama.
- Alleged conflicts link SEC officials to Ethereum, raising questions about Ripple’s lawsuit.
- Deaton’s findings hint at irregularities within the SEC, with implicated parties yet to respond.
The ongoing legal skirmish between Ripple and the US Securities and Exchange Commission (SEC) has taken a new turn, with John Deaton, a lawyer supporting Ripple, spotlighting potential conflicts of interest. Significantly, Ethereum finds itself at the core of these allegations. The complex network of connections, now dubbed “ETH-Gate,” warrants a closer examination.
The Ripple Conundrum Explained
Deaton begins by elucidating “regulatory capture,” a scenario where a regulatory entity intended to represent the broader public instead advances the interests of a specific group within the sector it regulates. Consequently, Deaton directs our focus to a series of events intertwining former SEC Chairman Jay Clayton, SEC official William Hinman, and venture capital giant a16z (Andreessen Horowitz).
On March 26, 2018, Lowell Ness, acting on behalf of a16z, reportedly handed Hinman a note and a Safe Harbor document with specific references to ETH. Moreover, shortly after that, Hinman publicly stated that ETH wasn’t a security while still actively associated with his law firm and a member of the Enterprise Ethereum Alliance (EEA).
Potential Conflicts and Implications
However, the narrative deepens. Deaton points out that Hinman’s law firm was an EEA member when he made this declaration. Additionally, he was still a profit-sharing partner at this firm. Besides, Deaton highlights a potential conflict involving Clayton’s law firm, which represented Joseph Lubin, an ETH co-founder, and Consensys, a significant ETH stakeholder. Another twist is Clayton’s firm’s role in facilitating a merger between Quorum and Consensys using JPMCoin, a rival to Ripple and XRP.
Joe Grundfest’s involvement adds another layer to this intricate narrative. Deaton indicates that Grundfest, a vital working group member, had ties with Ethereum founders as early as 2014-2015. Quoting Grundfest, Deaton shares, “He believed XRP shouldn’t be treated differently than ETH.” Grundfest also expressed concerns about the sudden departures of Clayton, Hinman, and Berger, calling it suspicious. He questioned the rationale behind suing Ripple, especially since XRP had been in the public domain for seven years.
Yet, Clayton chose to sue Ripple as he was exiting the SEC. Notably, he soon joined One River, a firm with a hefty investment in Bitcoin and Ethereum.
Hinman’s journey post-SEC is equally noteworthy. After a relatively short tenure at the SEC, he rejoined his EEA-affiliated law firm, richer by $15 million. Later, he partnered with A16Z, the group that had sought a safe harbor for ETH. Deaton also raises concerns over Hinman’s adherence to directives, suggesting that Hinman might have overlooked specific instructions during his SEC tenure.
As these revelations surface, they hint at potential irregularities within the SEC during Ripple’s lawsuit. However, as of now, the SEC and the implicated parties remain silent on Deaton’s claims.
XRP traded at $0.4937 at press time, indicating a 2.95% decline in the past 24 hours.
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