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Coinbase Accuses U.S. SEC, FDIC of Improperly Blocking Document Requests

Jun 26, 2024
  • Coinbase, through an intermediary, is again taking U.S. regulators to court to argue about Freedom of Information Act requests.
  • The U.S. crypto exchange is going after documents at the Securities and Exchange Commission that may reveal how it first began deciding what digital tokens the agency would consider as securities.
  • The company’s contractor, History Associates, is also suing the Federal Deposit Insurance Corp. over letters sent to financial firms to ask them to pause crypto activities.

As a researcher with a background in finance and experience following regulatory developments in the cryptocurrency industry, I believe that Coinbase’s decision to sue the SEC and FDIC over document requests is a significant move that could potentially shed light on the regulators’ views on digital assets and their enforcement actions.

A research firm represented by Coinbase filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) and a federal banking agency on Thursday, alleging they have refused to provide requested documents under open records laws, which could offer insight into the regulatory bodies’ perspectives on cryptocurrencies.

Representing the American digital assets trading platform, Coinbase, History Associates Inc. stated that they have been inappropriately denied access to requested documents by both the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC). The documents in question, as per Coinbase’s request under the Freedom of Information Act (FOIA), include correspondence from the SEC regarding the classification of three closed cases concerning which digital assets the agency deems to be securities – specifically Ethereum‘s ether (ETH) among them. Meanwhile, at the FDIC, Coinbase is seeking copies of the aforementioned “pause letters” reportedly sent by the FDIC inspector general to financial institutions, advising them to halt crypto-related activities.

Coinbase’s legal team is moving quickly to file this challenge against the SEC, coming hot on the heels of reports that the SEC has finished reviewing Ethereum 2.0 and may view it as no longer a security. This ongoing enforcement matter involving ether could make it more complicated for the SEC to deny document requests.

The transaction is additionally requesting records associated with two past digital assets cases under investigation. One pertains to Zachary Coburn, the founder of EtherDelta, a platform identified by the SEC in a 2018 decision as facilitating the trade of ether tokens classified as “digital asset securities.” The other case revolves around Enigma MPC, a blockchain company that offered $45 million worth of ENG tokens for sale in 2017, which were subsequently determined by the SEC to be unregistered securities.

Paul Grewal, Coinbase’s Chief Legal Officer, expressed his concern in a recent post on X (previously known as Twitter), stating that they had requested documents from the SEC concerning closed investigations to gain insight into the regulatory body’s interpretation of its extensive new powers. He mentioned that one such investigation, which concluded not long ago, centered around Ethereum (ETH), an asset the SEC declared was not classified as a security back in 2018. Additionally, other probes had ended years prior, but the SEC reportedly denied their requests for access to these documents.
As a crypto investor, I’ve been following the ongoing requests for information from the SEC regarding closed cases and the recent Ethereum (ETH) matter under the Freedom of Information Act (FOIA). However, I’ve come to understand that the SEC has denied these requests, citing “exemption 7A” – a protection meant to shield matters that could potentially weaken or compromise ongoing law enforcement efforts.

Spokespeople for the SEC and FDIC declined to comment on the lawsuits.

“The lawsuit filed by History Associates against the FDIC contends that the letters requesting banks to halt their dealings with digital asset businesses represent a calculated and coordinated attempt by the FDIC and other financial regulators to force financial institutions into isolating digital-asset firms from the banking sector.”

I’m currently observing ongoing legal disputes between Coinbase and U.S. financial regulators, specifically the SEC. One of these cases involves accusations from the SEC that Coinbase is operating an unregistered exchange dealing with securities, which is a significant issue in the crypto industry. Another notable aspect is that Coinbase has filed a lawsuit against the SEC, aiming to compel the regulator to provide clear-cut definitions of digital asset securities through a court order.

As a crypto investor, I’ve noticed that Coinbase has taken a proactive stance in defending the crypto community’s interests by funding lawsuits against U.S. government entities. In 2022, they supported a coalition of investors and developers, some of whom were even Coinbase employees, who filed a lawsuit against the U.S. Treasury Department over their sanctions against Tornado Cash. Unfortunately, this legal battle wasn’t successful in a federal court, but the plaintiffs have chosen to appeal the decision.

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2024-06-27 17:55