Pressure Mounts on Gensler to Release IG Report as New Letter Exposes XRP’s Unfair Treatment and Ethereum’s Free Pass

Empower Oversight is calling on Congress to release an SEC inspector general report on former chairman Jay Clayton’s actions. A nonprofit focused on government accountability, they questioned Hinman, who served as the SEC’s Division of Corporation Finance director from 2017 to 2020.

The group found documents suggesting Hinman may have violated ethics rules about conflicts of interest and sent evidence to the SEC’s Office of Inspector General in May 2022. In February 2024, the SEC’s inspector general said the investigation was almost finished. The report could support their investigation before Clayton is confirmed as U.S. Attorney for the Southern District of New York.

What Did Hinman Say in His Controversial 2018 Speech?

In 2018, Hinman gave a high-profile speech stating that Ethereum’s digital token, Ether, was not a security, which led to an immediate rise in Ether’s price. This raised questions about whether Hinman violated the law by promoting Ether while having financial conflicts of interest.

“Based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions,” he had said.

Outside groups, including Consumer Action for a Strong Economy (CASE), have continued to push the SEC to release the report. Pro-XRP lawyer John Deaton wrote, “TIME TO RELEASE THE REPORT @GaryGensler If we are going to move forward – we do so with complete TRANSPARENCY. If Gensler doesn’t release this report, Paul Atkins needs to do so immediately. @HesterPeirceand others should be calling for its release.”

XRP vs SEC:

The issue also revolves around a lawsuit filed on December 22, 2020, during the final days of the Trump administration. SEC Chairman Jay Clayton and William Hinman, Director of the SEC’s Division of Corporation Finance, sued Ripple Labs, its co-founder Chris Larsen, former CEO and executive chairman, and current CEO Brad Garlinghouse. The lawsuit accused them of selling $1.3 billion worth of XRP cryptocurrency as unregistered securities.

Tristan Leavitt, in his 22-page letter, wrote how SEC commissioner Joseph Grundfest felt SEC’s actions against XRP were problematic. 

Grundfest wrote to the SEC and said, “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.