In a searing critique, John E. Deaton, a prominent legal advocate for XRP, has issued a forceful condemnation of SEC Chairman Gary Gensler, accusing him of undermining ethical standards and fostering an environment of deceit at the US Securities and Exchange Commission (SEC).
Deaton’s allegations emerged following a statement by Patrick McHenry, Chairman of the House Financial Services Committee, asserting that Gensler had misled Congress during his testimonies, particularly concerning the regulatory status of Ether as a security. McHenry’s statement reflects a broader concern about potential misrepresentations and obfuscations by the SEC which, according to him, indicate a pattern of “regulation by enforcement.”
#ICYMI: New court filings indicate that @SECGov Chair Gary Gensler knowingly misled Congress when pressed on the classification of #ETH at a @FinancialCmte hearing to conduct oversight of his agency.
Read my full statement pic.twitter.com/8osMpbY6Iu
— Patrick McHenry (@PatrickMcHenry) April 30, 2024
Deaton Details Gensler’s ‘Bad Faith’
In a statement on X, Deaton directed public attention to his amicus brief in the Coinbase litigation, emphasizing its significance in illustrating Gensler’s questionable regulatory practices. “With all due respect, it’s time to serve multiple subpoenas on Gary Gensler and the SEC. I encourage everyone to read the Amicus Brief I filed in the Coinbase case. There’s a section in the brief proving Gensler is a bad faith regulator who has infected the entire agency,” Deaton asserted.
The amicus brief itself details accusations against Gensler, presenting a narrative of an SEC that manipulates legal outcomes to fit its agenda, often at the expense of innovation and transparency. Deaton cites multiple instances where federal judges have criticized the SEC for its “win at all costs” approach.
For example, Judge Netburn in a related XRP lawsuit remarked on the SEC’s strategy, stating, “Shielding the Court from indisputable truths is a win at all costs strategy and another example of the SEC adopting its litigation positions to further its desired goal, and not out of a faithful allegiance to the law.”
The brief goes further, pointing to specific comments by SEC Commissioner Hester Peirce, who criticized her own agency’s approach to regulation. Peirce noted, “Inviting people to come in and talk to us only to drag them through a difficult, lengthy, unproductive, and labyrinthine regulatory process casts the Commission in a bad light and thus makes us a less effective regulator.”
Highlighting the legal and financial ramifications of the SEC’s actions, Deaton’s brief references the agency’s alleged threats to bankrupt companies through litigation—a claim supported by a declaration from the founder of LBRY. “The SEC’s objective of bankrupting us through the process, which they threatened privately three years ago, they succeeded,” stated the founder, whose experience was documented in court filings.
Moreover, the brief critically examines Gensler’s previous statements, which Deaton argues are contradictory and demonstrate bad faith. Before his tenure at the SEC, Gensler expressed concerns about the lack of regulatory clarity in digital asset markets.
However, as chairman, he has asserted that “the rules related to crypto assets are well-settled” and that “the test to determine whether a crypto asset is a security is clear,” remarks made during his speech at the Aspen Security Forum on August 3, 2021.
These contradictions are at the heart of Deaton’s critique, suggesting a pattern of behavior at the SEC where the truth is less important than the regulatory outcomes the agency seeks to achieve. The brief warns that such behavior not only damages the SEC’s credibility but also has significant implications for the future of digital asset regulation in the US.
XRP Lawyer Community Reacts
Meanwhile, other lawyers from the XRP community have criticized McHenry’s empty words. Marc Fagel, a retired securities lawyer commented, “C’mon, John. As a lawyer, you know McHenry’s statement is bogus. The SEC has made no legal determination as to ETH, and GG made no misrepresentations at the hearing. You can disagree with and disdain the guy, but be honest about it.”
Fred Rispoli, founder of HODL Law stated with regards to McHenry, “This line from your release is inaccurate and/or misleading: “Committee Republicans will continue to hold Gary Gensler’s SEC accountable for its regulatory overreach….”Respectfully, sir: How have you held it accountable in the first place? Genuinely want to know.”
At press time, XRP traded at $0.4881.
