SEC Inspector General Banning Crypto Ownership Blocks Hiring Agencies

The United States Securities and Exchange Commission's Office of Inspector General has disclosed the most serious leadership and performance challenges facing the agency. No surprise to anyone in the crypto community, Crypto was on the list.

The OIG's “Statement on SEC Governance and Enforcement Challenges” has not been disclosed and “noncompliance with existing securities laws by crypto asset market participants,” the agency's previous statements pointed out.

Existing law leaves oversight loopholes related to crypto assets other than securities and certain stablecoins. There is a call for comprehensive legislation and inter-organizational coordination. The report also said:

“The law regarding the application of securities laws to crypto assets is limited and still evolving.”

Those facts are well known. Employment cases at the SEC are rarely publicized. The report said the agency is trying to increase crypto specialist positions in its examinations, trade and markets and enforcement divisions. The Office of the General Counsel and the Office of International Affairs are also looking to fill new positions.

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The SEC's recruitment efforts have been frustrated by a small candidate pool and intense competition from the private sector for crypto specialists. Many potential candidates include crypto assets, the report continued:

“Candidates are often reluctant to disclose their crypto holdings to the SEC.”

This prevents them from acting on a decision made by the Office of Ethics Counsel within the agency. The OIG said it plans to provide more scrutiny to the SEC's hiring practices in fiscal year 2024.

The OIG responds to external requests for investigation as well as conducts internal examinations, although it is inherently slow to respond. The OIG has been called in to investigate a possible conflict of interest by former corporate finance director William Hinman, who has been widely quoted as saying that Ether is not a security.

The SEC Inspector General's (OIG) report is a must-read. In addition to the embarrassingly bad performance review, the OIG concludes that “certainty exists” that the SEC has jurisdiction over crypto. This is the SEC's own police on beat talk. https://t.co/aOjOyzhQZX

— Stuart Alderoty (@s_alderoty) October 27, 2022

Hinman had a financial interest in the law firm Simpson Thatcher & Bartlett, a member of the Enterprise Ethereum Alliance (EEA), the good government group claimed in a 2022 letter to the OEG. In the year Investigated in June 2023, attorney John Deaton asked the OIG to re-examine Hinman's speech in an interview with Cointelegraph.

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