Coinbase has intensified its legal battle with U.S. regulators, filing a motion seeking clarity regarding deleted text messages from former SEC Chair Gary Gensler. The motion comes after the SEC acknowledged that nearly a year’s worth of Gensler’s communications—specifically from October 2022 to September 2023—were unintentionally erased due to an oversight by the agency’s IT team, which deleted messages before backups could be secured.
In the newly filed motion, Coinbase’s legal team is calling for a court appearance to scrutinize how the SEC handled requests under the Freedom of Information Act (FOIA). They argue that the agency has not adequately searched for records that should include Gensler’s messages, particularly those relevant to Ethereum’s pivotal transition to a proof-of-stake mechanism. This transition is seen as crucial to Coinbase’s ongoing legal skirmishes with the SEC.
The request not only aims to compel the SEC to provide all relevant communications but also seeks additional remedies, potentially including legal fees and the appointment of a special counsel if the SEC’s actions are deemed to have violated court directives.
The situation has escalated scrutiny on the SEC’s practices. An Inspector General’s report indicated that the loss of Gensler’s texts was described as avoidable, leading to further allegations from Coinbase and other cryptocurrency entities regarding the SEC’s transparency and information withholding.
In response to the controversy, the SEC has emphasized its commitment to transparency, with current Chair Paul Atkins initiating a review of the incident and implementing new protocols to prevent future occurrences. However, the admission of the deletion is unlikely to ease the ongoing tensions between the SEC and cryptocurrency firms, which have increasingly accused the agency of lacking clear regulatory guidelines while aggressively pursuing enforcement actions.
Coinbase’s conflict with the SEC is part of a broader struggle that saw the regulator file a lawsuit against the exchange in 2023, alleging it operated as an unlicensed securities broker. Coinbase contends that the SEC’s inconsistent communication and opaque decision-making have hindered innovation and led to companies exiting the U.S. market.
By inspecting Gensler’s deleted messages, Coinbase aims to ascertain whether private communications may reveal insights into the SEC’s enforcement strategies. A favorable outcome for Coinbase could potentially alter the dynamics of its ongoing confrontation with U.S. regulatory bodies.
In the financial community, sentiment around Coinbase remains moderately positive. Recent analyst ratings for Coinbase stock indicate a consensus of “Moderate Buy,” derived from 28 analyst evaluations over the past three months. This includes 14 “Buy” ratings, 12 “Hold” recommendations, and two “Sell” advisories. With an average 12-month price target estimated at $376.14, analysts suggest a potential upside of just over 16% from its current trading price.
