Coinbase Sues SEC and FDIC Over Unfulfilled FOIA Requests, Accuses Agencies of Stifling Crypto Industry

Coinbase Sues SEC and FDIC Over Unfulfilled FOIA Requests, Accuses Agencies of Stifling Crypto Industry

Coinbase has filed two lawsuits against the U.S. Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) for failing to comply with Freedom of Information Act (FOIA) requests, seeking court intervention to compel these agencies to comply.

In the lawsuits filed in the U.S. District Court for the District of Columbia, Coinbase, with the assistance of consulting firm History Associates Inc., accuses federal financial regulators of attempting to isolate the cryptocurrency industry from the banking sector. FOIA requests allow the public to request records from any federal agency.

“For nearly two years, a wide array of federal financial regulators — including the Securities and Exchange Commission, the FDIC, and the Federal Reserve Board — have used every regulatory tool at their disposal to try to cripple the digital-asset industry,” states the complaint against the FDIC. “This FOIA lawsuit seeks to bring to light the FDIC’s role in that unlawful scheme.”

Both the SEC and FDIC declined to comment on the matter.

Requests Sent to the SEC

The FOIA requests submitted to the SEC sought information on the agency’s stance on ether. Blockchain software firm Consensys highlighted this in a lawsuit against the SEC last month, mentioning that Gurbir Grewal, the SEC’s Director of the Division of Enforcement, approved an investigation into “Ethereum 2.0” in March 2023. This investigation targeted individuals and entities involved in buying and selling ether. Consensys later reported that the SEC announced the closure of its investigation into Ethereum 2.0.

History Associates specifically requested “access to all copies and records concerning Ethereum’s shift to a proof-of-stake consensus mechanism.” The SEC denied this request and the subsequent appeal.

Additionally, History Associates filed FOIA requests regarding two now-closed investigations, one involving Zachary Coburn and another concerning Enigma MPC. The firm requested “records… reflecting or concerning any investigation” related to the two cases. Enigma MPC, a data encryption startup, settled with the SEC in 2020 after the agency deemed its tokens to be securities, thus violating securities laws. Coburn, who created the crypto trading platform Ether Delta, settled with the SEC in 2018 after the agency classified his platform as an unregistered exchange.

History Associates stated that the SEC denied these requests following appeals, citing that the disclosure “could be reasonably expected to cause harm to the related, ongoing and active enforcement proceedings.”

“The SEC’s rationale for withholding documents from investigations that concluded in settlements years ago is tailor-made to frustrate the legitimate purposes for which Coinbase sought the Coburn and Enigma MPC documents in the first place — to understand the view of the law that underlies the SEC’s enforcement blitzkrieg against the digital-asset industry,” Coinbase asserted in the complaint. “The SEC’s stonewalling violates its FOIA obligations.”

Pause Letters

In the complaint against the FDIC, Coinbase noted that History Associates requested information on the agency’s “pause letters.” Between March 2022 and May 2023, the FDIC issued these “pause letters” to some financial institutions, asking them to refrain from expanding crypto-related activities and to provide more information. This was documented in a 2023 report from the FDIC’s Office of Inspector General, which is responsible for evaluating the FDIC.