In the ongoing saga between U.S. Securities and Exchange Commission (SEC) and Ripple Labs, John Deaton, a prominent American attorney who is the owner of the Deaton Law Firm (which is based in East Providence, Rhode Island) and who has been closely monitoring the lawsuit, recently shed light on a potential misstep by Ripple that could have averted the lawsuit. Deaton is also the founder of the website CryptoLaw, which “was launched in 2021 to be a clearinghouse of information, news and analysis on key U.S. legal and regulatory developments for digital asset holders”, as well as the host of the YouTube channel CryptoLaw.
In a post published on X (formerly known as Twitter) on 20 August 2023, Deaton expressed his admiration for Joseph Lubin, Ethereum’s Co-Founder and the Founder of ConsenSys, for his strategic decision to hire the law firm Sullivan & Cromwell shortly after Jay Clayton’s appointment to the SEC. Deaton believes that Lubin’s move was astute because it ensured that Clayton would recuse himself from any voting related to enforcement actions against a client of his former law firm. This was further emphasized when Clayton, during a session with Senator Elizabeth Warren, committed to abstaining from votes against enforcement actions involving his firm’s clients.
Deaton highlighted a particular deposition of William Hinman, former SEC Director of the Division of Corporation Finance. According to Deaton, Clayton had suggested Hinman liaise with Lubin, hinting at a potential collaboration between Clayton and his former law firm in representing Lubin and ConsenSys. Deaton found it noteworthy that Clayton showed keen interest in Hinman’s meetings with ConsenSys, frequently inquiring about their progress.
Drawing attention to Hinman’s association with the law firm Simpson Thacher, Deaton pointed out potential conflicts of interest. He mentioned that Hinman, contrary to his claims, was not retired from the firm but was a profit-sharing partner. Deaton raised eyebrows at Hinman’s financial gains from the firm, especially after delivering a speech that classified BTC and ETH as non-securities. Deaton also questioned Hinman’s claims of being unaware of his firm’s membership in the Enterprise Ethereum Alliance.
Further, Deaton commented on Clayton’s post-SEC career move to One River, a firm that had placed a significant bet on BTC and ETH. He found it coincidental, given that Clayton had voted for enforcement action against Ripple, Ethereum’s competitor, shortly before his departure from the SEC.
Deaton also mentioned Joe Grundfest, a former SEC commissioner and current Stanford professor, who had cautioned Clayton against taking action against Ripple, predicting significant financial losses for innocent holders. Despite the warning, Clayton proceeded with the enforcement action.