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The revolving door between the U.S. crypto industry and Wall Street's top cops has been particularly active this year. A former SEC lawyer who now represents private sector crypto clients says this trend is a good thing.
LaDan Stewart spent eight years as an enforcement attorney at the Securities and Exchange Commission, where he helped bring high-profile cases against major cryptocurrency companies such as Coinbase and Ripple. Now a partner at the prominent law firm White & Case, Mr. Stewart helps defend the same types of clients he pursued during his time at the SEC.
“There's been a lot of press coverage and a lot of negative connotations about the revolving door between the SEC and the defense team in general,” Stewart said. “I think this is really good because by being on both sides, you can really understand how they think.”
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Stewart made the comments last week on stage at Crypto Investor Day, an event hosted by entrepreneur and investor Anthony Pompliano. Her remarks focused on what she has learned since entering private practice, including government regulatory challenges and whether it is appropriate for a former SEC employee to gain government experience as a corporate representative. , which drew harsh reactions on social media. They used to regulate.
“What was very striking to me when I came to this side was how much anger there was on the industry side about the SEC and Gary Gensler, who was almost a boogeyman,” she said. He said this, referring to the SEC chairman, who is a currency skeptic. .
Securities and Exchange Commission Chairman Gensler testifies during the Senate Banking, Housing and Urban Affairs Committee Oversight Hearing on the SEC in Washington, DC on September 14, 2021. (Evelyn Hochstein Poole/Getty Images/Getty Images)
Gensler has been heavily criticized by the crypto industry for his three-year enforcement action against the industry since becoming chairman in 2021. Cryptocurrency executives like Ripple Labs CEO Brad Garlinghouse, whose company is battling the SEC in court, have said of Gensler's rules: They often complain of a “reign of terror” in which their good faith attempts to engage government agencies often end up being sued anyway.
Ripple Labs CEO Brad Garlinghouse attended a panel discussion at the Singapore FinTech Festival on November 12, 2018 in Singapore. (Wei Leng Tei/Bloomberg via Getty Images/Getty Images)
“I think when you're on the side of the SEC and you're dealing with people in a hostile environment, you expect that to be the case,” Stewart said. “But once you realize that there are people who come to this side and really want to find a way to work with regulators, they're wondering who's at the helm of the SEC, or in general, Biden. For government officials, it seems to feel like that's not possible, given that it's not possible.''For officials, it stands in the way of efforts to clarify regulations and any efforts that would allow them to work toward building this industry. I think it will be. ”
FOX Business first reported Stewart's comments. Via X. Her words were met with incredulity from lawyers representing crypto companies, who have been actively seeking to engage with the SEC for years, but are struggling to find regulatory clarity. It states that attempts to establish it have been rebuffed.
One such lawyer is Paul Grewal, Coinbase's chief legal officer, who is currently leading the company in its lawsuit with the SEC and who was in court with Stewart earlier this year when he represented the SEC. We met face to face.
“I've never been at a loss for words. Until now,” he said in response to Stewart's comments, which acknowledged industry players wanted to engage with regulators.
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Kathryn Minarik, chief legal officer at UniSwap Labs, who recently received a wells notice from the SEC, also weighed in.
“I hope you understand that there are people out there who really want to find ways to work with regulators without having to leave the SEC,” she said. “Many of us have been saying exactly that for years to the SEC, other regulators, Congress, and anyone who will listen.”
While there is nothing new for government employees to move to the private sector after working in government, problems can arise when senior officials move into industries that are specifically targeted by their enforcement agendas. The same is true when industry experts reach high-level government positions, sometimes seeking to support their industries with favorable regulations.
Securities and Exchange Commission (SEC) headquarters in Washington, DC, January 28, 2021. (SAUL LOEB/AFP via Getty Images/Getty Images)
At least three other prominent lawyers, including former Executive Director Gurbir Grewal, have left the agency to work for private law firms representing crypto clients.
Grewal, who oversaw an aggressive enforcement policy against the crypto industry under Gensler, left the agency this month to join Milbank LLP's New York office as a litigation and arbitration attorney. Milbank is one of the law firms representing cryptocurrency exchange Binance in its lawsuit with the SEC, which Grewal himself brought as executive director.
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Other figures spanning the industry include David Hirsch, former head of the SEC's crypto assets and cyber division; He left this summer to join law firm McGuire Woods, where he advises on cryptographic issues and cybersecurity regulations. The department's former acting chief, Carolyn Welshans, left this month for law firm Morgan Lewis to focus on securities enforcement matters.
Jay Clayton, who served as SEC chairman under former President Donald Trump and brought about 50 enforcement actions against the crypto industry during his tenure, currently owns crypto custody and security platform Fireblocks. serves as an advisor. He also serves as an advisor to crypto asset investment firm One River Digital Asset Management and speaks at various industry events.
Then-SEC Chairman Jay Clayton speaks at the New York Economic Club Luncheon on September 9, 2019 in New York City, New York. (Reuters/Shannon Stapleton/Reuters Photo)
Bill Hinman, former head of corporate finance at Clayton, said in a market-moving speech in 2018 that Bitcoin and Ether, the two largest digital assets by market capitalization, are “sufficiently decentralized” to not be considered securities. and therefore not subject to SEC jurisdiction. After leaving the SEC in 2020, Hinman returned to his former law firm, Simpson Thacher & Bartlett, as a senior advisor and became a partner at venture capital firm Andreessen Horowitz, where he focused on crypto and fintech. advises on regulatory issues affecting investments in
Bill Hinman is a former director of corporate finance at the Securities and Exchange Commission. (U.S. Securities and Exchange Commission)
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Since Clayton and Hinman's resignations, the SEC has stepped up efforts to bring the $2 trillion cryptocurrency industry into compliance. Under Mr. Gensler, the agency has brought more than 100 enforcement actions against industry participants and strengthened its crypto assets and cyber division to deal with the growing number of cases.
Stewart said he believes this election will usher in a new era for the SEC, regardless of whether Donald Trump or Kamala Harris wins the White House. Gensler is unpopular with both Democrats and Republicans and could be forced to resign despite his term ending in 2026.
SEC Chairman Gary Gensler attends a meeting of the U.S. Treasury Department's Financial Stability Oversight Council in Washington, DC on July 28, 2023. (Kevin Dietsch/Getty Images/Getty Images)
“Regardless of what happens after November, I think the change in administration itself will help put new people in place who can hopefully find ways to work with industry,” she said. “The negative effects are [crypto’s] I think the anger really prevents us as an industry from making any adjustments with the SEC and getting anything done. ”
