The US Securities and Exchange Commission (SEC) was dealt the next major blow in its battle against the US crypto industry yesterday. At the center of this whirlwind of allegations is an assessment by the US Government Accountability Office (US GAO) on Staff Accounting Bulletin No. 121 (SAB 121) and criticism by pro-XRP attorney John E. Deaton, who pointed out an apparent breach of protocol and possible corruption at the SEC.
Jake Chervinsky, Chief Policy Officer at Blockchain Association, was one of the first to ring alarm bells. He remarked, “The GAO reviewed SAB 121, an illogical anti-crypto accounting bulletin issued by the SEC last March, and found that it’s a “rule” under the CRA and APA. The SEC didn’t comply with either. This is a clear statement from a federal agency that the SEC broke the law.”
The US GAO is an independent, nonpartisan government agency within the legislative branch of the United States government. It is often referred to as the “congressional watchdog” and serves a crucial role in providing fact-based, nonpartisan information to Congress, the heads of executive agencies, and the public.
Chervinsky elaborated on the ramifications of SAB 121, indicating that the bulletin has crippled the crypto industry, setting back progress and innovation while not being approved by US Congress.
Pro-XRP Lawyer Deaton Smells Corruption
Perhaps the most scathing and impactful voice in this growing storm of dissent was John E. Deaton. In his tweet, Deaton drew upon Chervinsky’s assertions to magnify the perceived lapses on the part of the SEC.
Expounding on this, he referenced the SEC’s past, notably during the Ripple lawsuit. Deaton emphasized, “Ever since the Ripple lawsuit, the SEC has consistently NOT followed the law. A federal judge literally stated that the SEC’s enforcement lawyers, and the leadership they report to, are not only hypocrites, but they also ‘lack a faithful allegiance to the law.’ It was an incredible statement for a federal judge to make.”
Deaton further asserted that the US GAO’s assessment is further evidence that the SEC is riddled with corruption. “Here’s what I can say with great conviction: Today, the SEC does more to hurt investors than it does to protect investors.” He went on to make an even bolder claim, stating that the SEC has become both an “inept and corrupt organization. Full stop,” the pro-XRP lawyer remarked.
Stuart Alderoty, Ripple’s CLO, also joined the conversation, pointing out SEC Chair Gary Gensler’s public statements in contrast to the agency’s current predicament. He remarked, “While Mr. Gensler is making bad Halloween jokes on X, his agency is being shamed for ignoring the law that requires agency rules to be reviewed by Congress. Seems the SEC has become the lawless Wild West Gensler loves to talk about so much.”
SAB 121 Will Soon Be History
Adding another layer of analysis, Cody Carbone, Vice President of Policy at Digital Chamber, presented extensive insight into the fallout of the GAO’s conclusions on SAB 121. He criticized the SEC for its attempt to downplay the significance of SAB 121 by labeling it as merely an “agency statement.”
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Carbone explained the procedures laid out by the Congressional Review Act (CRA) which mandates all agency rules to undergo a 60-day review phase. This period allows Congress to assess, and if necessary, disapprove rules enacted by federal agencies. If such a resolution of disapproval gains traction—being passed by both Houses of Congress and then signed by the President—the contentious rule stands nullified, preventing the agency from reissuing a similar regulation without explicit congressional authorization.
All eyes are now on the SEC, anticipating its next move. “If it [the SEC] does not [withdraw SAB 121], the GAO’s analysis makes a slam dunk out of a lawsuit against the SEC alleging a violation of the APA’s notice-and-comment requirement,” Chervinsky concluded.
At press time, XRP traded at $0.6006.