- Attorney John Deaton exposes possible conflicts of interest amid the ongoing Ripple-SEC lawsuit, hinting at a narrative termed “ETH-Gate”.
- Former SEC officials and their relations with Ethereum-centric entities may have unduly influenced the regulatory action against Ripple.
In the unfolding legal saga between Ripple and the US Securities and Exchange Commission (SEC), John Deaton, an attorney ardently backing XRP, has recently unveiled possible conflicts of interest and potential regulatory bias that might have propelled the SEC’s legal action against Ripple.
WHAT IS REGULATORY CAPTURE:
regulatory capture, a form of government failure in which a regulatory agency, which is supposed to represent the needs of the greater public, advances the commercial concerns of a special interest group w/in the sector the agency is supposed to be… https://t.co/vzT0H3MhZ6
— John E Deaton (@JohnEDeaton1) September 24, 2023
Unraveling “ETH-Gate”: A Complicated Web
Central to these assertions is Ethereum, around which an elaborate narrative, now termed “ETH-Gate”, spirals, displaying a complex web of connections. The charges being multifaceted, delve into a murky territory that’s hard to traverse. Through a series of tweets, Deaton condensed the pivotal information shedding light on a term called “regulatory capture”.
“Regulatory capture occurs when a regulatory entity, poised to serve the broader public interest, advances the commercial concerns of a specific interest group within the sector it’s tasked to regulate.”
Deaton traces a chain of events linking former SEC Chairman Jay Clayton, SEC official William Hinman, and the venture capital firm a16z (Andreessen Horowitz). The sequence purportedly commenced on March 26, 2018, when Lowell Ness, representing a16z, submitted a note and Safe Harbor document to Hinman, specifically mentioning ETH. Not long after, Hinman, while still actively involved with his law firm (a member of the Enterprise Ethereum Alliance), publicly deemed ETH a non-security.
The narrative grows more convoluted with Deaton hinting at a direct conflict of interest involving Clayton’s law firm representing Joseph Lubin, an ETH co-founder, and Consensys, a significant ETH holder and promoter. He points out,
“Clayton’s firm also orchestrated the merger between Quorum and Consensys using JPMCoin, a direct competitor to Ripple and XRP.”
Moreover, Deaton mentions Joe Grundfest, who was an active part of the aforementioned working group, and had engagements with Ethereum founders as early as 2014-2015. Grundfest apparently highlighted that XRP shouldn’t be treated differently than ETH, pointing out the suspicious timing and ramifications of the lawsuit filed just as Clayton exited the SEC.
In a striking revelation, Deaton remarks on Hinman’s affluent return to the private sector post his SEC stint, becoming partners at a16z, highlighting a narrative that perhaps goes beyond mere regulatory enforcement. The disclosures hint at a level of entanglement that could have potentially skewed the SEC’s regulatory action against Ripple, a concern that lingers amidst the unfolding legal drama, as the involved parties remain silent on Deaton’s allegations.
At the time of reporting, XRP trades at $0.5097, with the echoes of “ETH-Gate” resonating through the crypto legal sphere, awaiting further unraveling.