Coinbase Demands Court Action later than SEC Erased Gensler Texts
What Coinbase Is Demanding
Coinbase Chief Legal Officer Paul Grewal said the erasures amounted to a “gross violation of public trust,” emphasizing that FOIA (Freedom of Information Act) rules require federal agencies to retain and disclose relevant records. “The Gensler SEC destroyed documents they were required to preserve and produce. We now have proof from the SEC’s own Inspector General,” Grewal said in a post on X.
Investor Takeaway
What the Inspector General Found
The OIG report, dated Sept. 3, revealed that the SEC excluded officials’ text messages from FOIA processing and permanently deleted Gensler’s texts from October 2022 through September 2023. The agency’s IT staff performed a factory reset on his smartphone, erasing all records without implementing proper backups.
That timeline coincides with critical industry events, including the collapse of FTX in November 2022 and a surge of SEC enforcement actions against crypto platforms such as Binance, Kraken, Gemini, and Coinbase itself. The deletion has drawn scrutiny from lawmakers, with the House Financial Services Committee signaling it may launch its own probe into the SEC’s recordkeeping practices.
Why the Deleted Messages Matter
Coinbase has long accused the SEC of pursuing “regulation by enforcement” rather than clear rulemaking. Grewal stressed that Coinbase had already requested “all communications” related to crypto enforcement years ago, yet the SEC failed to preserve or produce them. The deleted texts could have included discussions on enforcement priorities during a pivotal moment for the crypto industry.
Legal experts say if a court rules the SEC engaged in spoliation of evidence, penalties could range from sanctions to adverse inference instructions, where juries are told to assume deleted records were unfavorable to the SEC. Such an outcome would strengthen Coinbase’s defense and potentially reshape the ongoing case, which is viewn as a landmark for U.S. crypto regulation.
Investor Takeaway
What’s Next in the Case
Coinbase’s request for expedited discovery and sanctions puts pressure on the SEC as the case advances. The court will now determine whether the deletions violated FOIA obligations and if corrective measures are warranted. Meanwhile, lawmakers are expected to use the findings to intensify calls for oversight of the SEC’s handling of crypto regulation under Gensler’s leadership.
For Coinbase, success in this motion would mark a rare instance of turning regulatory pressure back onto the agency, potentially shifting momentum in one of the most closely watched cases for the future of U.S. digital asset markets.
