Essential Insights
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Coinbase Sanctions Motion: Coinbase is seeking court sanctions against the SEC after discovering that nearly a year’s worth of key communications from former Chair Gary Gensler were permanently deleted, impacting transparency during critical crypto events.
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FOIA Violations: The SEC is accused of violating the Freedom of Information Act (FOIA) by failing to properly maintain records and responding dismissively to Coinbase’s requests for information on enforcement actions.
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Public Trust Erosion: Coinbase’s Chief Legal Officer characterized the SEC’s actions as a “gross violation of public trust,” urging the court to ensure accountability and prevent future lapses in record-keeping.
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Evidence Preservation Concerns: Coinbase warns that there is an ongoing risk of losing more evidence that could damage its lawsuit and public confidence in regulatory practices, calling for expedited searches and investigations into destroyed communications.
Coinbase Seeks Sanctions Against SEC Over Deleted Communications
Coinbase has initiated legal action against the U.S. Securities and Exchange Commission (SEC). The firm claims the SEC permanently deleted nearly a year of texts from former Chair Gary Gensler. These messages, spanning from October 2022 to September 2023, contained vital discussions on key crypto events, including the FTX collapse.
In its motion, Coinbase argues that the SEC violated the Freedom of Information Act (FOIA). The company partnered with History Associates to support its claims. Recently, the SEC’s Office of Inspector General (OIG) reported significant failures in information handling, further highlighting the issue.
The OIG revealed that Gensler’s texts were lost due to a strict device wiping policy. This lapse included conversations about enforcement actions, settlements, and public speeches. Coinbase Chief Legal Officer Paul Grewal criticized the incident as a “gross violation of public trust,” urging the court to prevent future occurrences.
Moreover, Coinbase pointed out a perceived double standard. While the SEC regularly holds private companies accountable for record-keeping, it appears to neglect its own responsibilities. The company’s filing calls for expedited searches of remaining records and investigation into how communications were destroyed. It stresses that delaying action risks losing more evidence, potentially damaging public trust and the ongoing lawsuit.
Coinbase had previously filed FOIA requests in July and August 2023, seeking Gensler’s communications about Ethereum. However, the SEC issued blanket denials without reviewing the records. When Coinbase escalated the matter to court in June 2024, the SEC delayed compliance and only began searching for communications months later.
The OIG indicated that over 20 officials might have experienced similar data loss, with backup failures affecting about 40 devices. The findings suggest the SEC did not search text messages unless specifically ordered and neglected to inform requesters about deleted records.
Coinbase’s situation highlights the critical importance of transparency in regulatory bodies. As technology and digital currencies evolve, effective communication between agencies and stakeholders becomes essential for fostering trust and innovation in the financial landscape.
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