John Deaton, a well-known pro-crypto lawyer, has accused the U.S. Securities and Exchange Commission (SEC) of losing sight of its primary mission. He specifically questioned the testimony of Bill Hinman, the former Director of Corporation Finance at the SEC.
Hinman had stated under oath that the SEC could only satisfy some aspects of the Howey test to establish an offer or sale as an investment contract. Deaton raised concerns about this statement, suggesting that it leaves only two possibilities, either Hinman was inadequately qualified for his position, or he knowingly lied under oath.
Deaton pointed out that digital assets and the Ripple XRP case perfectly exemplify the SEC’s alleged neglect. He criticized the SEC’s Framework for Digital Assets, which was drafted and approved by Hinman. This framework notably ignored the common enterprise factor of the Howey test.
The Howey test is a legal framework used to determine whether certain transactions qualify as “investment contracts” and thus fall under the purview of U.S. federal securities laws. Ignoring aspects of this test could have significant implications for the classification of digital assets like Ripple XRP.
Deaton also raised concerns about potential conflicts of interest involving Hinman. He highlighted instances where Hinman’s law firm took the Bitcoin and Ethereum mining equipment company Canaan public.
Hinman allegedly benefited from Canaan’s profits and received a substantial sum from a law firm associated with the Ethereum Enterprise Alliance (EEA). Deaton called for regulatory reforms to prevent such conflicts of interest and maintain transparency in the sector.
The allegations against Bill Hinman have stirred controversy and raised questions about the SEC’s role in regulating digital assets. Deaton’s call for regulatory reforms emphasizes the need for transparency and the prevention of conflicts of interest within the agency. As the debate continues, it remains to be seen how these allegations will impact the SEC’s future actions and the broader landscape of digital asset regulation.
