SEC Under Fire for Lawbreaking With SAB 121: John Deaton Lashes Out

The SEC is facing scrutiny for allegations that it violated the law when issuing SAB 121.
The GAO has declared that SAB 121 should be subjected to a Congressional review, giving weight to Deaton's accusations.
Industry leaders have aligned themselves with the GAO's Declaration and raised serious questions about the SEC's authority and credibility.

This week, the Securities and Exchange Commission (SEC) has come under heavy scrutiny due to serious allegations that it may have violated the law when issuing the contentious Staff Accounting Bulletin No. 121 (SAB 121).

Among the most vocal and influential critics is John Deaton. But, that was expected, wasn’t it? Read on to know what he has to say.

John Deaton Slams SEC

In a tweet, John Deaton made a strong statement, claiming, “This is a clear statement from a federal agency that the SEC broke the law.”

His tweet is not just a casual comment; it is a severe criticism of the SEC’s approach to governing and enforcing the law in the world of cryptocurrency.

“This is a clear statement from a federal agency that the SEC broke the law.”

Ever since the @Ripple lawsuit, the @SECGov 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… https://t.co/gOHO1r560v
— John E Deaton (@JohnEDeaton1) October 31, 2023

All Things Lead Back to the Ripple Lawsuit

Deaton’s concerns are tied to the recent Ripple lawsuit, where a federal judge questioned the SEC’s legal team’s adherence to the law.

This worrying claim doesn’t just bring attention to the controversial SAB 121 but also raises doubts about the agency’s overall way of doing things. It raises a fundamental question about the SEC: Is the institution responsible for safeguarding investors doing more harm than good? Has it strayed so far from its mission that it has become ineffective and corrupt?

GAO Gets Involved

The Government Accountability Office (GAO) has added weight to Deaton’s accusations. The GAO has declared that SAB 121 should be subjected to a Congressional review, effectively dispelling the SEC’s earlier assertion that it did not qualify as a “rule” as defined under the Congressional Review Act (CRA).

Industry leaders like Jake Chervinsky have aligned themselves with GAO’s Declaration. Chervinsky stated that SAB 121 was “illegal from the start” and caused “extraordinary damage” to the crypto industry. This ensemble of voices raises serious questions about the SEC’s authority and credibility.

This is huge.

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. https://t.co/brglK3sm8S
— Jake Chervinsky (@jchervinsky) October 31, 2023

The Future is Uncertain

With a bipartisan bill introduced to challenge SAB 121 and a 60-day Congressional review period approaching, the SEC finds itself in a delicate situation. The question is not only whether SAB 121 will withstand this review, but also whether the SEC can navigate this credibility crisis.

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As Deaton’s tweet reverberates through legal circles, cryptocurrency forums, and beyond, the SEC is not merely confronting a review of a specific regulation, but also a crisis of faith in its institution. The upcoming 60 days will be pivotal for cryptocurrency regulation and the SEC.