Crypto companies are threatening to wage a retaliatory war against law firms if they hire lawyers from the outgoing Biden administration who played a role in trying to rein in their industry through coercive measures.
Coinbase’s CEO and Ripple’s CLO used social media posts to call for blacklisting all lawyers leaving the Securities and Exchange Commission and other federal agencies who worked on lawsuits against their industry.
“We have made it clear to all the law firms we work with that if they hire anyone who committed these bad actions under the previous administration (soon), we will no longer be their clients,” Brian Armstrong, CEO of Coinbase, the largest crypto exchange in the United States, said in a statement December 1st.
Stuart Alderoty, chief legal officer of Ripple, a crypto payments processor, made a similar point in a commentary. he posted on the same day.
” PleaseDo not easily hire any lawyer involved in a lawsuit against any crypto company or project,” he said. Anyone who applauded the SEC going after a crypto company or its CEO or founder should also be kept away, he said. “You want a list? My DMs are open.
The SEC has sued Coinbase and Ripple, among other crypto companies, for making tokens available to investors outside of federal securities laws. By filing the lawsuits, the agency made the two companies the centerpiece of its efforts to regulate crypto as a type of security subject to the same federal laws as other securities.
Companies, as well as other players in the sector, having insisted crypto is too different to be regulated by existing rules and proposed working with the agency to create a new regulatory framework. The companies believe crypto is better regulated as a commodity or collectible, and have criticized the agency for avoiding their offer to work together on the rules and instead embarking on what they call a application-driven approach that turns businesses into adversaries without first giving them rules to follow.
“Taking enforcement action before ensuring regulatory clarity results in arbitrary results with limited value as a guiding precedent,” Coinbase said in a petition he filed a request in 2022 asking the agency to work on a new set of rules.
Businesses have reason to hope that the new Trump administration will be receptive to their position. The president-elect has said he wants to lead a crypto-friendly government and appointed agency heads who fit this project.
Among his appointments are hedge fund chief Scott Bessent as Secretary of the Treasury and CEO of Canter Fitzgerald Howard Lutnick as Commerce Secretary, both advocates of Bitcoin.
And on December 4, he appointed Paul Atkins to lead the SEC. As a former commissioner of the agency, Atkins was openly pro-crypto. He would succeed Gary Gensler, who plans to leave the SEC in January.
“Trump’s return to the White House will mean a new era for crypto – with fewer government barriers,” the Wall Street Journal said in a statement. December 1 report.
One of the first steps Atkins could take would be to withdraw the agency’s complaints against Coinbase and Ripple, among others, and adopt new rules, the Journal said.
“The SEC wasted valuable time by positioning itself as a cop and should have come around with a set of new rules,” the Journal said, paraphrasing a comment by Sarah Hammer, executive director of the Wharton School at the University of Pennsylvania.
Based on his recent actions, Gensler is doubling his efforts to enforce the law. In early December, he appointed Jorge Tenreirohead of the SEC’s Crypto Assets Unit, as the SEC’s chief legal counsel, a role that puts him on the front lines of litigation against Coinbase and Ripple.
With this appointment, “the SEC has sent a clear signal that it is not backing down”, crypto publication CoinPedia said in a December 3 report.
Law firms are already feeling the heat from the crypto industry.
In his article X, Coinbase’s Armstrong singled out law firm Milbank LLP for hiring former SEC enforcement chief Gurbir Grewal in October.
“Milbank… made a mistake and hired Gurbir,” he said. “We’re not working with them now (and we never will as long as he’s working there). In my opinion, it is an ethical violation to try to illegally kill an industry while refusing to publish clear rules. If you were senior there, you can’t say you were just following orders.
When Grewal’s hiring was announced, George Canellos, global head of Milbank’s litigation and arbitration group, praised Grewal for his work at the SEC.
“It is difficult to imagine a better solution for our firm and our clients. » Canellos said in October. “At every stage of his career, Gurbir has exemplified exactly the qualities we value most: creativity, civic-mindedness, collegiality and total dedication to the interests of his clients. His arrival further strengthens our large and growing group of former government officials and white-collar crime and regulatory enforcement specialists.
Milbank, Coinbase and Ripple did not immediately respond to Legal Dive’s requests for comment.
