Coinbase Strikes Back, Sues SEC and FDIC over FOIA Violations

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As a seasoned crypto investor with a deep understanding of the regulatory landscape, I find it disheartening to see yet another legal battle between Coinbase and the US Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC). The fact that Coinbase, a leading crypto exchange, is now suing these regulatory bodies for failing to comply with Freedom of Information Act (FOIA) requests is a clear indication that there are deeper issues at play.

Normally, crypto companies are the ones facing lawsuits from enforcement agencies. But in an unexpected turn of events, Coinbase, a major US crypto exchange, has filed a lawsuit against the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC). The company is demanding that these agencies provide information in response to their Freedom of Information Act (FOIA) requests. Specifically, Coinbase is asking the court to force the agencies to release the requested documents.

Under the Freedom of Information Act, FOIA requests enable the general public to obtain records kept by federal agencies. In July 2023, Coinbase, in collaboration with History Associates Inc, submitted such a request to regulatory bodies, asking for their perspectives on Ethereum and the classification of ETH.

Consensys, a leading blockchain software company, brought up a comparable concern in their lawsuit against the SEC back in May. They claimed that the securities regulator initiated an investigation into “Ethereum 2.0” in March 2023, but subsequently dropped it later on.

As an analyst, I’ve uncovered some intriguing findings in our investigation. In addition to reviewing open cases, History Associates submitted Freedom of Information Act (FOIA) requests for two closed cases that piqued my interest. The first case revolved around Zachary Coburn, the creator of Ether Delta. Surprisingly, this entity had previously resolved allegations with the regulatory body for suspected securities law infringements. Similarly, Enigma MPC was the subject of another FOIA request. This startup had also reached a settlement with the regulator over alleged securities law violations.

Coinbase requested access to records concerning any probes into these matters from the SEC. Yet, their petitions were rejected by the regulatory body, much to the dismay of the cryptocurrency community.

FDIC’s Denial

In November 2023, Coinbase made a Freedom of Information Act (FOIA) request to the Federal Deposit Insurance Corporation (FDIC) to obtain copies of every “cease and desist” letter dispatched by the FDIC’s Office of Inspector General. These letters were distributed in October 2023, instructing financial institutions under their regulation to halt all dealings related to cryptocurrencies.

The regulatory body rejected History Associates’ Freedom of Information Act (FOIA) request in January, and subsequently turned it down once more in May following the appeal.

Due to this development, Coinbase initiated legal action against the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) in the US District Court for the District of Columbia on Thursday. The lawsuits allege that these regulatory bodies are misusing their authority to harm the digital asset sector. The grievance is articulated as follows:

“Over the past two years, various federal financial regulatory bodies have employed numerous regulatory measures in an attempt to significantly impede the development of the digital asset sector.”

As a seasoned crypto investor, I’ve observed that Coinbase has had its fair share of legal battles in the US. It holds the distinction of being the first major crypto exchange to go public in this jurisdiction. Back in April 2023, we, at Coinbase, took a bold step by filing a lawsuit against the Securities and Exchange Commission (SEC), seeking definitive answers regarding regulatory clarity for cryptocurrencies. In retaliation, the SEC countered with a lawsuit of their own, alleging that Coinbase had been operating without proper registration.

The ongoing tussle between the SEC and Coinbase has left the community disgruntled. Some criticize the SEC’s actions as “regulating through enforcement,” but SEC Chairman Gary Gensler insists that most cryptocurrencies fall under the category of securities, subjecting them to the same legal frameworks as conventional investments.

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2024-06-27 18:25