TechCrunch's editor has a mounting conflict of interest problem, a problem that will inevitably alter the tech blog's coverage. But don't take our word for it—that's what TechCrunch says.

"I'll be a direct or indirect investor in a lot of the new startups in Silicon Valley, and that will mean that there will be financial conflicts of interests in a lot of my stories," writes TechCrunch editor and founder Mike Arrington in a blog post about his new investment policy, crafted to help cope with a slew of new investments he's making around Silicon Valley. "Either because I write about those companies, or write about a competitor, or don't write about a competitor." Arrington added that TechCrunch will sometimes have to sit on stories when he's considering, but has not yet closed, investment deals.

Arrington says "I think that this will all be fine," because he plans to disclose everything. But his conflicts have already illustrated how reporting financial tech news tends to be in fundamental opposition to participating in tech finance: Rather than reporting on Napster creator Shawn Fanning's new startup "Yo" when he heard about it, Arrington jumped in as an investor. Only when one of his reporters uncovered the story independently, as Arrington describes it, did TechCrunch publish the news that the site's own editor had known for some time. And that is the flaw with trying to mitigate conflicts with disclosure: You can't disclose when you're sitting on information; otherwise you are, by definition, not sitting on the information. Likewise, it's hard to see how TechCrunch is going to disclose when it doesn't cover a competitor of one of Arrington's companies (Twitter, maybe?).

The most prudent course of TechCrunch might simply be to drop all ethical pretense. "Readers might grow to mistrust TechCrunch and switch their allegiance," Tom Foremski writes at Silicon Valley Watcher. But that's the thing: TechCrunch's readers aren't like New York Times readers; they're not coming to the site as conscientious citizens trying to make the world a better place, but as sharks trying to find the angle that will help them make a fortune. Arrington's conflicts just enhance his branding as one of them.

For proof, look no farther than the 21 reactions initially posted under Arrington's article. Eleven were supportive—and five more were asking Arrington for investment money or advice. Just embrace it, Arrington.

[Photo of Arrington via via Robert Scoble/Flickr]