Coinbase has initiated a significant legal action against the U.S. Securities and Exchange Commission (SEC), raising serious concerns about regulatory transparency and communication standards. In a recent move, the cryptocurrency exchange filed a motion in federal court, requesting a hearing to investigate the SEC’s deletion of critical text messages, particularly those involving former SEC chair Gary Gensler and other high-ranking officials.
The SEC’s Office of the Inspector General (OIG) reported that the agency deleted nearly a year’s worth of text messages — from October 2022 to September 2023. This significant loss of data was attributed to “avoidable” errors. In light of this, Coinbase seeks clarity regarding why the SEC did not conduct a thorough search of its records, which encompass communications from senior officials. Despite having submitted multiple Freedom of Information Act (FOIA) requests in both 2023 and 2024, the SEC has yet to provide access to these records.
Coinbase’s Chief Legal Officer, Paul Grewal, took to social media to highlight the issue, stating, “The Gensler SEC destroyed documents which they were required to preserve and produce.” He underscored that the evidence of this misconduct originates from the SEC’s own inspector general’s findings.
The court filing requests expedited discovery, seeking a swift collection of evidence while also calling for sanctions against the SEC. Moreover, Coinbase demands the immediate production of all missing messages related to SEC communications.
To bolster its position, Coinbase has enlisted the expertise of a private research firm known as History Associates to assist in tracking down the lost communications. The exchange believes these messages could hold crucial insights into the SEC’s regulatory treatment of Ethereum and other assets during Gensler’s leadership.
The Inspector General’s report revealed more alarming information, including a SEC policy that automatically wipes mobile devices that have been inactive for 45 days, contributing to the loss of valuable text messages that may have contained important regulatory discussions.
Coinbase pointed out the contradiction inherent in the SEC’s actions. The agency has previously imposed substantial fines on companies for not sufficiently maintaining their records, yet it appears to have failed to adhere to its own standards.
This situation transcends a mere record-keeping issue and probes deeper into questions regarding regulatory transparency and fairness. Coinbase asserts that regulators ought to be held to the same standards as the businesses they oversee.
The implications of Coinbase’s legal action could be far-reaching. Should the court rule in favor of Coinbase, the SEC may face significant challenges regarding its operational integrity. The cryptocurrency sector is watching closely, as this case could reshape how U.S. regulators engage with digital communication in the regulatory landscape.
For the time being, Coinbase is relentless in its pursuit of accountability, seeking the messages that might illuminate the regulatory practices and decisions made behind closed doors at the SEC.
