TLDR
- Coinbase has filed a legal motion against the SEC over the deletion of former Chair Gary Gensler’s text messages.
- The company claims the SEC failed to provide comprehensive communications about Ethereum and digital asset matters.
- Coinbase accuses the SEC of delaying searches and using narrow search terms, hindering a full review of key information.
- The SEC’s Office of Inspector General confirmed that Gensler’s text messages were permanently erased between October 2022 and September 2023.
- Coinbase is pushing for the court to impose sanctions on the SEC for failing to meet record-keeping requirements.
Coinbase has filed a legal motion against the U.S. Securities and Exchange Commission (SEC) over the deletion of former Chair Gary Gensler’s text messages. The company argues that the SEC violated the Freedom of Information Act (FOIA) and damaged public trust. The case has raised questions about the integrity of the SEC’s handling of records, especially those related to digital asset regulation.
Coinbase Accuses SEC of Delaying and Narrowing Searches
In its court filing, Coinbase claims the SEC failed to provide comprehensive communications about Ethereum and digital asset policies. The company argues that the SEC’s search efforts were delayed and limited by narrow search terms. Coinbase says these actions hindered the ability to fully review crucial communications, which could have influenced public understanding of SEC decisions.
The company further alleges that the SEC did not disclose the loss of records in a timely manner. According to Coinbase, this lack of transparency further undermines trust in the SEC’s regulatory practices. Coinbase insists that the public has a right to understand the agency’s decision-making processes, especially on key issues like cryptocurrency regulation.
Coinbase’s legal motion also highlights the SEC’s failure to comply with previous orders to release digital asset communications. The company contends that the SEC’s actions are indicative of broader issues within the agency regarding record-keeping and transparency. As part of its legal response, Coinbase is pushing the court to impose sanctions on the SEC for not meeting FOIA requirements.
SEC Under Fire for Deleting Gensler’s Texts
A recent report from the SEC’s Office of Inspector General confirmed the deletion of Gary Gensler’s text messages between October 2022 and September 2023. The report found that the deletion occurred due to a new policy that remotely wipes devices after 45 days of disconnection from the SEC network. Gensler’s phone was reset, which permanently erased all of his text communications during that period. Attempts to recover the lost texts were unsuccessful.
The missing records cover a period of significant developments in the crypto industry, including the collapse of the FTX exchange. The report also revealed that many of the deleted texts would have qualified as official federal records. Investigators found that the loss of Gensler’s messages could have major implications for transparency regarding SEC enforcement actions, especially those involving cryptocurrency exchanges like Coinbase.
The Inspector General also uncovered additional issues with the SEC’s record-keeping practices. Text messages from more than 20 senior SEC officials may be missing, with nearly 40 other devices not properly backed up. This raises concerns about the broader loss of critical records that could affect ongoing investigations and enforcement actions related to the crypto industry.
Coinbase Seeks Sanctions and Expedited Discovery
Coinbase is urging the court to impose sanctions on the SEC for its mishandling of records. The company is also requesting expedited discovery to determine how many records were destroyed and the efforts made to recover them. Coinbase believes that the SEC failed to disclose the deletion of texts in a timely manner, further eroding public trust in the agency.
Coinbase claims that the SEC should be held to the same record-keeping standards it enforces on private companies. The company points out that the SEC has fined numerous firms for inadequate record-keeping practices in recent years. By failing to follow its own guidelines, Coinbase argues, the SEC jeopardizes its credibility in overseeing the rapidly growing cryptocurrency industry.