Cryptocurrency insiders know the hammer is about to come down.The chair of the U.S. Securities and Exchange Commission, Gary Gensler, has all but promised that tougher regulation for the industry is in store. The White House is working on a crypto initiative, too, with plans to issue an executive order on regulation sometime this month.
While it’s not clear what exact form new rules and enforcement efforts will take, one thing is obvious: the U.S. government is planning to bring the fight to crypto.
The crypto industry isn’t just watching and waiting – it’s lawyering up.
Following a playbook that has worked in the traditional finance world, it’s not just snatching up any lawyers. It’s going after lawyers who worked in government, and particularly for the agencies most likely to give crypto trouble.
Crypto companies, the venture capitalists that fund them and the law firms that represent them have all been hiring attorneys from the SEC, the Justice Department, the U.S. Commodities Futures Trading Commission, and other enforcement entities. . After all, who knows how government agencies and prosecutors’ offices work better than the people who have been on the inside?
Here are some hired guns from the regulatory and enforcement realm that the crypto industry now has on its side.
Crypto firms and exchanges bringing on ex-officials
One especially high-profile attorney who left the government and dove into the world of crypto is Jay Clayton, who headed up the SEC from May 2017 until December 2020. Since then, he’s gotten involved with multiple crypto enterprises. First came his March 2021 appointment to a regulatory advisory council for One River Digital Asset Management, a crypto-focused institutional asset manager, followed by his appointment in August to an advisory board for crypto custodian Fireblocks. He’s also with the law firm Sullivan and Cromwell LLP.
A major player who has gone from crypto to government and back again is former acting head of the Office of the Comptroller of the Currency Brian Brooks. Brooks, who ran the banking regulator from April 2020 until January 2021, had worked for Coinbase before he got there. He is now the CEO at Bitfury, a security and infrastructure provider for the Bitcoin Blockchain. He took that job after spending just four months as the CEO of the U.S. arm of crypto exchange
Binance, which has seen its fair share of attention from regulators around the globe. His departure didn’t leave Binance entirely without a lawyer to give it solid regulatory advice though, its general counsel is Norman Reed, former general counsel at Ripple Labs and himself a veteran of the SEC and the New York Fed. The exchange also has former senator Max Baucus as a senior policy advisor, who not only served as chair of the U.S. Senate Committee on Finance but also spent time earlier in his career as an attorney at the SEC.
With exchanges likely to see more heat from regulators, Binance is not the only one that has brought in ex-regulators. Coinbase, whose CEO has publicly feuded with the SEC, has done the same. The exchange most recently hired Thaya Knight, who had been counsel to an SEC commissioner Elad Roisman until he stepped down, to be its senior public policy manager. She won’t be alone there among ex-government personnel.
The exchange’s chief legal officer Paul Grewal, who came to the company from Facebook, is a former U.S. magistrate judge for the Northern District of California. Faryar Shirzad, the company’s chief policy officer, came to the exchange from Goldman Sachs, but before that was the White House Deputy National Security Advisor.
Meanwhile, another exchange, FTX.US, boasts Ryne Miller as its general counsel. Miller joined from Clayton’s firm Sullivan & Cromwell, but before that he was an attorney at the Commodity Futures Trading Commission. At the CFTC, he served as legal counsel to then-chair Gensler, the one who now heads up the SEC.
A VC firm with an army of lobbyists
Andreessen Horowitz may not technically be a crypto firm, but the venture capital giant has made it plain that it is all in on crypto with more than $3 billion invested across three funds investing in crypto companies and protocols. To help make sure those investments pay off, a16z has bolstered its ranks with ex-government lawyers who are lobbying to help shape future crypto legislation and regulation.
The firm made a splash when it snapped up Katie Haun, a former federal prosecutor who created the government’s first cryptocurrency task force. Haun, who also sits on the boards of Coinbase and OpenSea, two companies in which the firm is a major investor, is well known for prosecuting corrupt government agents who stole Bitcoin from Silk Road during the course of the investigation into the dark-web marketplace. In December, Haun announced that she plans to move on from the VC firm early this year to start her own venture capital firm. The split appears amicable though, Andreessen Horowitz and its founders will be involved in her new fund, and she’s keeping her board seats.
In another big score for the firm, lawyer Brian Quintenz joined the team at Andreessen Horowitz as an advisory partner just days after leaving his post as a CFTC commissioner. His tenure at the CFTC included helping to craft comprehensive briefings on crypto and overseeing the debut of crypto futures contracts on derivative exchanges.
The team also includes as advisory partners attorneys Bill Hinman, a former SEC bigwig (you’ll hear more about him later), and Brent McIntosh, who joined after a stint as Under Secretary of the Treasury for International Affairs. The VC firm’s chief legal officer Jai Ramaswamy is also a former prosecutor whose roles at the DOJ included a white collar, money laundering and computer crimes focus.
The team are not technically lobbyists, and aren’t registered as such, but they have certainly pitched their ideas in Washington. The firm claims it is simply pushing to make Web3 a force for good, but detractors say its policy proposals seem most focused on shoring up its bottom line. Whatever the agenda, the firm has no shortage of ex-official firepower.
Law firms with ex-officials happy to represent crypto interests
Shuttling attorneys between government regulatory agencies and the law firms that represent the players in the regulated industries is a tried and true strategy for ensuring that companies get access to the best possible representation when the government comes after them, and now it’s starting to happen for crypto, too.
That’s how, for example, Ripple was able to score ex-SEC chair Mary Jo White, one of the country’s foremost securities experts, in the company and its executives’ battle with the SEC over $1.3 billion in sales of its XRP digital asset, which the agency considers an unlicensed security.
White, who is also a former U.S. attorney for the Southern District of New York, was appointed by President Barack Obama to lead the securities watchdog in 2013 and remained at its helm until 2017. She’s now at Debevoise and Plimpton LLP and is among the gaggle of attorneys defending Ripple in the headline-grabbing litigation. Another Debevoise attorney on the case is Andrew Cereseney, who served for nearly four years under White as the SEC’s director of enforcement and also spent time as the deputy chief appellate attorney for the U.S. Attorney’s Office for the Southern District of New York.
And White doesn’t mince words when it comes to how she thinks her former agency is handling the case. “There’s no way to sugarcoat it,” White told Fortune. “They’re dead wrong legally and factually.”
Another ex-regulator turned BigLaw attorney who has Ripple’s back is J. Christopher Giancarlo, a former chair of the CFTC who is now a lawyer at Willkie Farr & Gallagher LLP. Giancarlo, known in some corners of the crypto world as “CryptoDad” because of the pro-crypto stance he took as a regulator, recently co-authored a law review paper arguing that XRP was not a security. In addition to his work at Willkie, a firm that represents Ripple in some matters, Giancarlo has made other inroads into the crypto industry since leaving the agency in 2019. He joined the board of directors at smart-contracts focused software provider Digital Asset and the board of block-chain focused investment firm CoinFund after founding the Dollar Digital Project to advance a U.S. central bank digital currency.
The revolving door to law firms might cut both ways for Ripple, though. In December, watchdog group Empower Oversight slapped the SEC with a lawsuit, seeking access to documents it claims could show potential conflicts of interest for lawyers at the SEC regarding Ripple because of their connection to a law firm that works with competitor Ethereum.
The group asserts that Hinman (also an a16z advisory partner), the head of the SEC’s Division of Corporation Finance from 2017 to 2020, was receiving millions of dollars from Simpson Thacher LLP, the law firm to which he returned after his service, while regulating cryptocurrencies at the agency – including when he publicly stated that Ethereum was not security. (A judge said in June that Ripple could depose Hinman in the case against it, despite the SEC’s objections.)
Marc Berger, who as the SEC’s acting director of enforcement was involved in the Ripple case, also ended up at Simpson Thacher after leaving the government, Empower Oversight noted. What any of this ultimately means for Ripple is yet to be seen, but it’s likely good news for Ethereum to have their expertise available.
And with most law firms recently striving to beef up their crypto knowhow as the regulatory landscape heats up, many are drawing from government ranks, meaning that the crypto industry will have plenty of places to turn. Examples abound, including Cahill Gordon & Reindel LLP’s decision in late 2021 to hire Samson Enzer, a former assistant U.S. Attorney in the Southern District of New York and senior member of the SDNY Securities and Commodities Fraud Task Force, whom the firm describes as “one of the leading cryptocurrency enforcement practitioners to come out of government service in recent years.”
Another is Sarah Heaton Concannon who joined Quinn Emanuel Urqhuart & Sullivan LLP, a firm that already had a deep crypto bench, as co-chair of its SEC enforcement group after a stint as a senior trial attorney at the SEC.