Digital Payments & CBDCs: How Hinman & Simpson Thacher Rigged the Race for Digital Asset Dominance.
Previously, we revealed that the SEC is almost certainly hiding evidence that William Hinman abused his position as Director of Corporation Finance to boost Ether on behalf of his colleagues at Simpson Thacher and their clients. Knowing that, one might assume that Clayton’s last minute hit on Ripple was simply an extension of his and Hinman’s willingness to manipulate the retail crypto market to the benefit of their Wall Street associates.
While the evidence strongly suggests that Clayton and Hinman did conspire to pick winners and losers among private cryptocurrencies, that explanation only tells half of the story. The full scope of Hinman and Clayton’s indiscretion only becomes clear when you consider how their actions and statements affected the global race for digital asset dominance between the world’s two largest economies: China and the United States.
When most people think of digital assets, decentralized cryptocurrencies like XRP, bitcoin and ether come to mind first. However, governments and banks are far more enthusiastic about the potential of central bank digital currencies, or CBDCs. Unlike cryptocurrencies, CBDCs are centralized, digital versions of established fiat currencies that offer many of the same efficiencies but allow governments to retain control over monetary policy, prevent financial crime, and strengthen their economies at the cost of individual privacy.
In an ideal future, both forms of digital assets will coexist; cryptocurrencies and CBDCs will be available for use in transactions between individuals and businesses according to their personal preferences while CBDCs, sometimes facilitated by private intermediaries, will enhance payments between central banks and major financial institutions. However, all of that depends on the ability and willingness of government agencies to invest in CBDC development and the public-private partnerships necessary for their success while also promoting private innovation in blockchain by creating coherent legal and regulatory frameworks. On this, the United States has failed spectacularly, in large part due to the regulatory mess created by Clayton’s SEC.
Finding a Motive
By cultivating confusion and branding specific blockchain and cryptocurrency companies as enemies of the SEC, Clayton and Hinman irreparably damaged the United States’ chances of being the global leader in digital asset development. Until recently, most took for granted that this was an unfortunate side effect of their desire for personal enrichment. However, that would require the pair to be entirely naïve as to the consequences of their actions. While Clayton and Hinman might want to play dumb to escape accountability, neither is stupid. With decades of experience on Wall Street and all of the SEC’s internal research in front of them, there is no way that they didn’t realize that sabotaging Ripple and bankrupting XRP holders, among other disruptive actions, would hurt US financial competitiveness in the long term.
In our last article, we wrote that “nothing on Wall Street happens by chance.” That maxim holds here as well, so only two explanations for Clayton and Hinman’s conduct remain: that they knew but didn’t care that they were undermining America’s economic and strategic interests, or that undermining them was deliberate, and the confusion they created was a smokescreen designed to hide it.
In either scenario, there is one clear beneficiary: the Chinese Communist Party.
Simpson Thacher and the Digital Yuan
While several smaller countries have developed CBDCs, China, with its digital yuan, is the only major economy to have fully piloted a digital version of its national currency. The Chinese Communist Party accomplished this through their own version of a public-private partnership: by seizing control of the Alipay digital payments infrastructure created by Ant Group, the fintech-focused affiliate of Alibaba.
For those who have been following our content, the fact that the CCP is using Ant Group technology to deploy the digital yuan should erase any doubt that Hinman and Clayton might have had ulterior motives besides personal enrichment. Hinman’s law firm, Simpson Thacher, has a long history of helping Chinese state-controlled companies access US markets. That relationship was built in large part by Leiming Chen, the former head of Simpson Thacher’s China practice who became a Senior Vice President at Ant Group in 2016. As partners at Simpson Thacher, Hinman and Leiming Chen, alongside Jay Clayton, helped bring Alibaba public in 2014 in the largest IPO in history. The $25 billion raised then helped fund Alipay’s international expansion and the development of the digital infrastructure used by the digital yuan.
In a previous article we reported that Simpson Thacher cooperated with Ant Group to make Leiming Chen vanish from the internet in early July. Besides proving their ongoing collaboration, we speculated that Chen might have been shuffled into a more secret role at Ant Group. As it turns out, we were right. Information on Chen’s current position still doesn’t appear on any company website but someone at the CCP slipped up and failed to eliminate one mention of him in a Chinese stock acquisition announcement from August that names him as one of three directors of Antfin. Antfin is an obscure subdivision of Ant Group that focuses on regulatory technology, digital finance, and blockchain.
In other words, just as the CCP tightened its leash on Ant Group, Leiming Chen, a former Simpson Thacher Head of Practice and Hinman’s long-time friend and colleague, was made responsible for ensuring that China dominates blockchain technology and the future of digital payments.
A Rigged Race
To summarize what we know:
1. China is effortlessly working to be the global leader in the digital payments space in order to secure a competitive advantage over its strategic rivals.
2. William Hinman and Leiming Chen (Simpson Thacher) and Jay Clayton (Sullivan & Cromwell) helped Alibaba secure the funding it needed to expand Alipay internationally.
3. The Chinese Communist Party has seized control of Alipay and secretly put Leiming Chen in charge of ensuring that the digital yuan succeeds.
4. Rather than position the US to compete, Hinman and Clayton did everything in their power to confuse blockchain innovators and foment antipathy between the SEC and the crypto space.
We are not saying that Clayton and Hinman deliberately helped China gain an edge over the United States by sabotaging XRP and disrupting cryptocurrency research and development. We are just saying that they did exactly what they should have done if that was their intent.
The complete story behind Hinman and Clayton’s actions is slowly coming together, but there is still much more to uncover. In our next article, we will take a deep dive into Joseph Lubin, co-founder of Ether and founder of ConsenSys, and his connections to Simpson Thacher and William Hinman. We have discovered a tremendous amount of damning information about sleezy Joseph Lubin that we are working to verify before bringing it all to light.