Risk Update

Blockchains and Ethical Walls — SEC Sees Ripple Call Crypto Conflicts (Right Click Edition), Utility’s Slow Ethical Screen Insufficient

Posted Dan Bressler

“U.S organization sues SEC for Ripple case, claims top officials had conflict of interest” —

  • “A U.S government oversight organization has sued the SEC for its handling of the Ripple lawsuit and accused former chair Jay Clayton and director Bill Hinman of having a conflict of interest that biased them for Ethereum and Bitcoin, but against XRP.”
  • “EMPOWR wants the SEC to comply with a Freedom of Information Act request in which the organization wants access to records maintained by the watchdog. These records concern potential conflict of interest by some of the top SEC officials relating to cryptocurrencies.”
  • “The first target is Hinman, the former director of the division of corporate finance at the SEC. Before joining the regulator, he was a partner at law firm Simpson Thatcher. EMPOWR claims that Hinman continued to receive millions of dollars from the law firm while at the SEC, with one outlet reporting that the money he received from the law firm was seven times his government salary.”
  • “Receiving the funds isn’t a crime by itself. However, Simpson Thatcher is a member of the Enterprise Ethereum Alliance which aims to drive the adoption of Ethereum. Of note is that Hinman did declare that Ethereum isn’t a security back in 2018.”

“Pa. Court DQs Firm Over Conflict In Utility Pole Crash Suit” —

  • “A small Pennsylvania law firm can’t represent a client suing PPL Electric Utilities Corp. because it failed to build a ‘wall’ around an attorney who used to defend the utility company against personal injury cases, a divided Superior Court panel ruled on Tuesday.”
  • “The appellate court’s 2-1 majority found that Munley Law had not clearly established a policy to separate attorney John Mulcahey, who had previously been outside counsel to PPL while at Lenahan & Dempsey PC, from its other attorneys who took over the case representing plaintiff Matthew Darrow, so even though a Lackawanna County court had disqualified Mulcahey, it should’ve barred the rest of his firm from the suit as well.”
  • “PPL objected to the rest of the Munley firm representing Darrow or Rudalavage because Mulcahey could have “imputed” his conflict of interest to the rest of his firm under the Pennsylvania Rules of Professional Conduct. But the trial court determined that Munley Law could still handle cases against PPL since the firm had built a “wall” prohibiting Mulcahey from sharing his information with others at the firm — even though it had been established after his disqualification in the Darrow case and it had been years since Mulcahey had represented PPL.”
  • “The Superior Court majority said the late-erected barrier wasn’t enough in the Darrow case, weighing disqualification based on factors that the Eastern District of Pennsylvania established in its 1995 decision in Dworkin v. General Motors Corp.: the relationship between the attorney and the former client, the time between the cases, the size of the firm, the nature of the disqualified attorney’s involvement in the case and the timing of the ‘wall.'”