TLDR
- Coinbase pushes for court sanctions after the SEC erased Gary Gensler’s texts.
- Missing Gensler texts relate to FTX collapse and crucial crypto enforcement actions.
- SEC’s failure to maintain records risks the credibility of its crypto oversight.
- Coinbase demands expedited discovery to identify destroyed SEC records.
Coinbase is demanding that a federal court impose sanctions on the U.S. Securities and Exchange Commission (SEC) after nearly a year’s worth of text messages from former SEC Chair Gary Gensler were permanently erased. These messages, which reportedly contain crucial information regarding the FTX collapse and key enforcement actions involving Coinbase, were deleted due to an SEC policy involving device resets. The company claims that the SEC’s actions violate the Freedom of Information Act (FOIA) and hinder the public’s ability to understand critical regulatory decisions.
The deleted messages span from October 2022 to September 2023 and were integral to ongoing investigations into digital asset regulation, including Coinbase’s legal issues with the SEC. Coinbase, represented by History Associates, has filed a court motion urging the SEC to be held accountable for failing to preserve these records, which are considered public property under federal law.
SEC’s Failure to Comply With FOIA Orders
In its court filing, Coinbase outlined how the SEC failed to comply with previous orders to disclose communications related to Ethereum and other digital assets. The SEC allegedly delayed the search for relevant records, used overly narrow search terms, and did not inform the public or the court about the loss of these key documents until much later.
Coinbase’s legal team argued that these actions obstructed the review of important information that could have influenced public understanding of the SEC’s approach to digital assets. A report from the SEC’s Office of Inspector General (OIG) confirmed the deletion of Gensler’s text messages and revealed a broader issue: texts from over 20 senior SEC officials might also be missing, and several other officials’ devices were not adequately backed up.
Gensler’s Missing Texts: A Key Period in Crypto Regulation
The missing texts are particularly concerning given the timeframe they cover, which includes the collapse of the crypto exchange FTX and critical regulatory decisions related to digital assets. These events were pivotal moments in the evolution of U.S. crypto policy, and the SEC’s failure to retain these communications could undermine its credibility in regulating the sector.
The SEC claims that the deletion was part of a new policy that remotely wipes devices of officials who disconnect from the network for more than 45 days.
Gensler’s device was reportedly reset, leading to the permanent loss of his text messages. However, efforts to recover the records have been unsuccessful, prompting Coinbase to call for an expedited discovery process to determine the full extent of the SEC’s record-keeping failures.
Coinbase Seeks Sanctions for SEC’s Poor Record-Keeping
Coinbase is now pressing the court to impose sanctions on the SEC for its failure to maintain proper records. In its motion, the company insists that the SEC should be held to the same standards it imposes on private entities.
The SEC has fined companies over a billion dollars for failing to preserve records, particularly text messages, yet it is now facing allegations of its own shortcomings in this area.
Coinbase’s legal team also seeks expedited discovery to determine how many records have been lost, what steps the SEC took to recover them, and why the agency did not disclose these problems sooner. The company’s filing emphasizes that the SEC’s actions not only harm its case but also erode public trust in the agency’s ability to oversee digital assets effectively.
