In a bold move, Coinbase has taken a stand against the US Securities and Exchange Commission (SEC), accusing the agency of a systematic approach designed to undermine critical records. The firm claims the SEC’s actions have jeopardized vital communications concerning ongoing cryptocurrency litigation.
Coinbase’s Critique of the SEC’s Record-Keeping
Recently, Coinbase, with the help of research experts, filed a lawsuit urging the federal court to expose what they describe as the SEC’s covert policy shifts related to cryptocurrency through a Freedom of Information Act (FOIA) request.
According to Coinbase’s Chief Legal Officer, Paul Grewal, the objective is to rectify what they view as a significant breach of public trust by the regulatory body. The aim is to prevent such actions from reoccurring in the future.
“Evidence suggests that the SEC under Chair Gary Gensler has neglected the preservation of crucial documents. We have confirmation from the SEC’s own Inspector General about these lapses,” Grewal noted on social media, highlighting the serious ramifications of these lost records, despite Coinbase’s previous requests for complete communication logs.
Moreover, a recent report from the Office of Inspector General (OIG) has revealed preventable errors from the SEC’s IT department, leading to the mismanagement of records essential for crypto enforcement actions, particularly during Gensler’s leadership.
The lawsuit accuses the SEC of obstructing public inquiry by neglecting FOIA commands and destroying important documents, effectively disabling public insights into regulatory processes.
Coinbase’s legal action underscores the fact that records from several senior SEC officials, significant for understanding agency operations, have been excluded from FOIA searches. Reportedly, multiple essential text messages were erased after FOIA queries were submitted, creating additional layers of legal complexity.
The allegations further extend to more than 20 high-ranking SEC officials whose communications are believed to be at risk, emphasizing the agency’s long-standing awareness of these issues without any disclosure to relevant stakeholders during ongoing litigation.
Demanding Accountability and Transparency
Grewal firmly stated, “This is not a minor oversight; it constitutes a serious destruction of evidence central to active legal matters.” The court memorandum notes that the SEC cannot dismiss these issues with a claim of “no harm, no foul” for its tardy searches.
The filing argues that had the SEC acted swiftly in conducting searches in July and August 2023, the necessary documents would have been available for review or preservation.
“It’s likely impossible to fully understand the extent of valuable communications lost due to this obstructive behavior. However, it is clear that the SEC’s negligent handling of records needs immediate reform,” the filing argued.
Coinbase also articulated that the SEC has enforced substantial financial penalties against private entities for similar record-keeping failures, reinforcing the notion that regulatory bodies should adhere to the same standards of accountability.
To ensure the SEC faces its own legal standards and to safeguard against future breaches, Coinbase is advocating for an expedited review of all relevant communications, rigorous discovery processes, and appropriate sanctions for the alleged mishandling of documents.
