The US Securities and Exchange Commission (SEC) Chair Gary Gensler, known for his skeptical stance towards the crypto industry, is under investigation by Republican lawmakers.

The investigation, led by Representatives Jim Jordan, Patrick McHenry, and James Comer, centers on allegations of political favoritism in the SEC’s hiring practices.

SEC Hiring Scandal

In the letter addressed to Gensler, the lawmakers highlighted an email correspondence made public in an SEC rulemaking comment, which suggested that the hiring of Dr. Haoxiang Zhu, the SEC Director of Trading and Markets, may have been influenced by his political affiliation.

According to the lawmakers, Dr. Zhu emailed Gensler on May 18, 2021, affirming his ideological suitability for the role, stating, “I believe I’m in the right place on the political spectrum and I’m happy to provide as many details as needed so you feel comfortable.” Dr. Zhu was subsequently hired six months later, in November 2021.

The lawmakers argue that this correspondence indicates that the SEC may be “unlawfully considering” an applicant’s political ideology when hiring.

They allege that the SEC has been filling senior roles with individuals from “left-leaning organizations,” undermining the agency’s impartiality.

If proven true, this practice would violate the Civil Service Reform Act of 1978, which mandates that federal hiring be based on merit and not political considerations.

Implications For The Crypto Industry?

To assist with the oversight, Gensler has been mandated to produce documents and information dating back to April 17, 2021. This includes all documents and communications related to the SEC’s decision to hire, employ, or terminate any director or associate director within the SEC.

Additionally, the lawmakers have requested all documents and communications referring to the SEC’s consideration or evaluation of job applicants’ political affiliations or ideologies. Gensler has until September 24 to comply with these requests.

The investigation comes as the SEC’s actions under Gensler’s leadership over the past years have been criticized for stifling the crypto industry’s growth, targeting key players of the ecosystem.

All of this under the Biden administration is characterized by a cautious approach to digital assets, which pro-crypto lawmakers have accused of failing to provide a clear regulatory framework, leading to increased litigation and increased regulation by enforcement.

Rep. McHenry, a crypto industry advocate in Congress leading the current investigation, has previously issued numerous statements advocating for regulatory clarity and innovation to support the industry’s growth.