Could the SEC case against Ripple be stalled over a conflict of interest?

Newly discovered documents could pose a major obstacle to the Securities and Exchange Commission (SEC) in its case against Ripple if they prove a former commission official had a conflict of interest.

The SEC has been embroiled in a lawsuit against blockchain firm Ripple (XRP) since 2020, accusing the crypto company and executives Brad Garlinghouse and Christian Larsen of selling XRP tokens as unregistered securities.

In a May 10 announcement, corruption watchdog Empower Oversight claimed that documents obtained as part of a freedom of information request indicated that former SEC director of corporate finance William Hinman had a conflict of interest and would not have made a speech in 2018 in which he explained that Ether (ETH) and its transactions are not securities.

According to the nonprofit regulator, Hinman should have refrained from speaking about Ethereum due to his undisclosed “direct financial interest” in the law firm Simpson Thacher & Bartlett, which is a member of the Enterprise Ethereum Alliance (EEA).

The EEA promotes the use of blockchain technology on the Ethereum blockchain.

The founder of legal news outlet Crypto Law, attorney John Deaton, told his 198,000 Twitter followers on May 11 that Hinman’s potential compliance failure could jeopardize the SEC’s entire case against Ripple. If the conflict persists, Deaton said the case for Ripple could be “game set and match.”

According to Law360, a legal news outlet, Hinman worked at Simpson Thacher before joining the SEC and then rejoined the firm in 2021.

Empower Oversight said Hinman received $1.5 million annually in retirement benefits from the law firm while he was with the SEC, and claimed he had “repeated contact with the law firm’s staff.” The organization noted that the “SEC’s Office of Ethics specifically told him not to have any contact with Simpson Thacher personnel.”

The organization asked the SEC’s Office of the Inspector General to conduct a “comprehensive review of the SEC’s ethics officers” to determine whether Hinman had a conflict of interest. This review would include the following considerations:

“(1) Understand how the conflict involving this former official heightened the perception that SEC enforcement actions were selectively targeting some cryptocurrencies while giving others a free pass;

(2) explain to the public how the SEC’s Ethics Office has failed to effectively ensure compliance with its clear policies; and (3) evaluating SEC policies and procedures to identify ways to more effectively monitor compliance with ethics guidelines.”

(3) Evaluate SEC policies and procedures to identify ways to more effectively monitor compliance with ethics guidelines.”

This latest development in the case comes as an unexpected twist on top of former SEC official Joseph Hall’s February prediction that the commission will lose to Ripple on the merits of the case.

Many in the crypto industry have been watching this case closely as the outcome is likely to have a massive impact. If Ripple wins, it would force the SEC to desist from its aggressive stance on crypto. If the commission wins, it would almost certainly open the field for a bevy of new lawsuits against crypto companies.

Related: SEC and CFTC Chairs Discuss Crypto Regulation at ISDA Meeting

XRP is down 19.2% over the past 24 hours and is trading at $0.41, according to CoinGecko data.