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Crypto companies are threatening to wage a war of retribution against law firms if they hire lawyers from the outgoing Biden administration who played a role in trying to rein in their industry through enforcement actions.
The CEO of Coinbase and CLO of Ripple have used social media posts to take a critical look at lawyers leaving the Securities and Exchange Commission and other federal agencies that worked on lawsuits against their industry.
"We’ve let all the law firms we work with know, that if they hire anyone who committed these bad deeds in the (soon to be) prior administration, we will no longer be a client of theirs," Brian Armstrong, CEO of Coinbase, the largest crypto exchange in the United States, said in a December 1 X post .
Stuart Alderoty, the chief legal officer at Ripple, a crypto payments processor, made a similar point in a comment he posted on X the same day.
“Pl ease don’t hire any lawyer who was involved in suing any crypto company or project,” he said. Anyone who cheered the SEC suing a crypto company or its CEO or founder should also be kept out in the cold, he said. “Want a list? My DMs are open.”
The SEC has sued both Coinbase and Ripple , among other crypto companies, for making tokens available to investors outside of federal securities laws. In filing the lawsuits, the agency has made the two companies the centerpiece of its push to regulate crypto as a type of security that’s subject to the same federal laws as other securities.
The companies, along with others in the space, have insisted crypto is too different to be regulated under existing rules and have offered to work with the agency to create a new regulatory framework. The companies think crypto is more appropriately regulated as a commodity or a collectible, and have slammed the agency for eschewing their offer to work together on rules and embarking instead on what they call an enforcement-first approach that turns companies into adversaries without first giving them rules to follow.
“Leading with enforcement actions before ensuring regulatory clarity results in arbitrary outcomes with limited value as guiding precedent,” Coinbase said in a petition it filed in 2022 seeking the agency to work on a new set of rules.
In an email provided to Legal Dive, Alderoty said SEC lawyers were too quick to resort to litigation and shouldn’t now expect to walk away without consequences. “Those who were working proactively to destroy the crypto industry through regulation-by-enforcement should not be able to easily go through the revolving door," he said.
“This shouldn’t be terribly complicated to understand,” Paul Grewal, Coinbase’s CLO, said in a December 3 X post . “If you refuse to tell us the rules before suing us for supposedly violating those rules, we won’t hire you in the future.”
The companies have reason to hope the incoming Trump administration will be receptive to their call for new rules. The President-elect has said he wants to lead a crypto-friendly government and has named agency heads that fit that bill.
Among his nominations are hedge fund chief Scott Bessent as Treasury secretary and Canter Fitzgerald CEO Howard Lutnick as Commerce secretary, both of whom are Bitcoin advocates.
And on Dec. 4 he nominated Paul Atkins to head up the SEC. As a former commissioner of the agency, Atkins was outspokenly pro-crypto . He would take over from Gary Gensler, who plans to step down from the SEC in January.
“Trump’s return to the White House will mean a new era for crypto — with fewer government hurdles,” The Wall Street Journal said in a Dec. 1 report .
One of the first actions Atkins might take is withdrawing the agency’s complaints against Coinbase and Ripple, among others, and embarking on new rules, the Journal said.
“The SEC wasted valuable time by positioning itself like a beat cop and should have rallied around a set of new rules,” the Journal said, paraphrasing a comment by Sarah Hammer, executive director at the University of Pennsylvania’s Wharton School.
Based on recent actions, Gensler is doubling down on enforcement. In early December he appointed Jorge Tenreiro , the head of the SEC’s crypto assets unit, as the SEC’s chief litigation counsel, a role that puts him on the frontlines of the litigation against Coinbase and Ripple.
With the appointment, “the SEC has sent a clear signal that it’s not backing down,” crypto publication CoinPedia said in a Dec. 3 report.
Law firms are already feeling heat from the crypto industry.
In his X post, Armstrong of Coinbase singled out the law firm Milbank LLP for its hiring of the SEC’s former enforcement chief, Gurbir Grewal, in October.
“Milbank … messed up and hired Gurbir,” he said. “We don't work with them now (and never will while he works there). It's an ethics violation in my book to try and unlawfully kill an industry while refusing to publish clear rules. If you were senior there, you cannot say you were just following orders.”
When Grewal’s hiring was announced, George Canellos, global head of the litigation and arbitration group at Milbank, praised Grewal for his work at the SEC.
“It’s hard to imagine a better fit for our firm and clients,” Canellos said in October. “At every stage of his career, Gurbir has exemplified exactly the qualities we prize most—creativity, public spirit, collegiality, and total dedication to the interests of his clients. His arrival further strengthens our deep and growing bench of former government officials and white-collar criminal and regulatory enforcement specialists.”
Milbank didn’t immediately respond to Legal Dive’s requests for comment.
Editor’s note: This piece has been updated to reflect responses provided after publication to Legal Dive by Coinbase and Ripple.
