Coinbase Urges Court to Sanction SEC Over Missing Gensler Texts

Coinbase, working through History Associates, has told a federal court that the SEC’s actions violated the Freedom of Information Act and damaged public trust. The U.S. Securities and Exchange Commission (SEC) is facing new pressure after revelations that nearly a year of former Chair Gary Gensler’s text messages were deleted.

Coinbase Says Missing Gensler Texts Obstruct Ethereum and Crypto Policy Review

In its court filing, Coinbase said that the SEC failed to comply with earlier orders to provide complete communications on Ethereum and other digital asset matters. The company argued that the agency delayed searches and used narrow terms. Also, it failed to disclose the loss of records until much later. These actions, according to Coinbase, prevented the proper review of information that could have shaped public understanding of the SEC’s policies.

A report from the SEC’s Office of Inspector General confirmed that the ex-SEC chair’s texts from October 2022 to September 2023 were permanently erased. The Gensler missing records cover a period that included the collapse of crypto exchange FTX. It also contained several major enforcement actions, including cases against Coinbase itself.

The report explained that the deletion was linked to a new agency policy of remotely wiping devices that disconnected from the SEC network for more than 45 days. Gensler’s phone was reset, and the reset erased all of his text communications during that time. Efforts to recover the messages were unsuccessful. Investigators later found that many of the missing texts would have counted as official federal records.

Coinbase Demands Sanctions as SEC Faces Recordkeeping Credibility Crisis

The Inspector General also discovered risks beyond Gensler’s device. Texts from more than 20 other senior SEC officials may already be missing. Also, devices from nearly 40 additional officials were not properly backed up. This creates the possibility that more critical records have already been lost or are at risk of disappearing.

Coinbase is now pushing the court to impose sanctions on the SEC. It is also requesting expedited discovery to determine how many records were destroyed. In addition, it seeks to know what steps the agency took to recover them. Then, why it failed to disclose these developments.

The company insists that the SEC should be held to the same standards it enforces on private industry. Coinbase claimed that the regulator has fined firms more than a billion dollars in recent years for poor recordkeeping.

The firm has also faced resistance on other fronts, with global exchanges opposing Coinbase tokenized stock plans. This is a sign that challenges to the company’s operations extend beyond U.S. regulators.

The Coinbase filing also claimed that the deleted texts coincided with one of the most turbulent periods in crypto regulation. With missing records covering the timeline of the FTX collapse, the SEC’s credibility on digital asset oversight is under severe strain.