SEC Agrees to Overhaul Recordkeeping After Settling Coinbase Lawsuit Over Gensler's Lost Texts
The US Securities and Exchange Commission (SEC) has settled a Freedom of Information Act (FOIA) lawsuit with Coinbase, marking a significant development in the ongoing scrutiny of the regulator’s recordkeeping practices under the previous administration. The settlement, announced by Coinbase Chief Legal Officer Paul Grewal, requires the SEC to pay $150,000 in attorney fees, release two previously withheld documents, and review its policies governing the preservation of text messages and other electronic communications.
The legal dispute began in 2023 when the SEC sued Coinbase, the largest US-based cryptocurrency exchange. However, the roles reversed in 2024 when Coinbase, through its research firm History Associates, sued the SEC after the agency denied requests for internal communications related to its approach to crypto regulation. Coinbase argued the records could shed light on how the SEC developed its enforcement strategy against crypto companies during the Biden administration, including legal theories underlying lawsuits against Binance, Ripple, and others.
The conflict intensified after the SEC disclosed that certain texts involving former Chair Gary Gensler and other senior officials had been automatically deleted, rendering them unavailable under FOIA requests. Under Gensler’s leadership, the SEC imposed billions in penalties on banks and financial institutions for failing to preserve employee communications through texts and unofficial channels. Coinbase argued the regulator should be held to the same standards it enforced against the private sector.
While the settlement does not confirm any wrongdoing by the SEC, it requires the watchdog to review its record-retention procedures. This is considered groundbreaking for a regulator whose own rules emphasize preserving official communications. As of press time, the SEC had not officially confirmed the settlement.