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SEC Sued Twice in a Month for Blocking Freedom of Information Requests, Coinbase Latest Claimant

Last Updated June 28, 2024 10:54 AM
Giuseppe Ciccomascolo
Last Updated June 28, 2024 10:54 AM

Key Takeaways

  • Coinbase sued the US Securities and Exchange Commission (SEC) for blocking freedom of information requests.
  • The lawsuit is the second against the market regulator in one month.
  • The SEC previously filed lawsuits against several of Wall Street’s big corporations.

The cryptocurrency industry and US regulators are heading for a showdown. In a bold move, the crypto exchange Coinbase has filed  a lawsuit against the US Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC ), accusing them of stifling innovation and growth in the digital asset space.

This lawsuit marks a significant escalation in tensions and follows similar legal action from another industry group. However, the SEC had also filed cases against several big names on Wall Street on the same matter.

Coinbase Sues SEC and FDIC

In an escalation of tensions between the crypto industry and US regulators, Coinbase launched a legal offensive. The exchange filed lawsuits against the SEC and FDIC, accusing them of hindering the crypto industry‘s growth.

Coinbase claims the regulators, including the SEC, FDIC, and Federal Reserve Board, have been using various tactics to stifle the digital asset space for almost two years. These include withholding information requested through Freedom of Information Act (FOIA) requests.

Specifically, Coinbase sought details on the SEC’s view of Ethereum’s move to proof-of-stake and information from past investigations related to crypto. The SEC denied these requests, citing potential harm to ongoing enforcement actions. Coinbase finds these denials obstructive and a violation of FOIA’s purpose.

Coinbase’s Chief Legal Officer, Paul Grewal, further criticized  the regulators on social media. He accused the SEC of claiming broad authority over crypto but failing to provide clear or consistent regulations. Additionally, he claimed the FDIC pressured financial institutions to deny the crypto industry access to banking services.

Second Lawsuit In A Month

Coinbase’s lawsuit isn’t an isolated incident. In mid-May 2024, the American Securities Association (ASA), a financial industry group based in Tampa, filed a similar lawsuit  against the SEC.

ASA’s complaint centered around the agency’s opaque enforcement actions targeting how banks and other firms handle work communication on personal devices. This crackdown, initiated in late 2021, levied over $1.7 billion in civil fines.

The ASA’s lawsuit criticizes the SEC for lacking transparency in its enforcement practices. The association alleges the agency imposed penalties seemingly randomly, without clear justifications or explanations for the decisions.

The complaint highlights the SEC’s broad investigative and enforcement powers while raising concerns about their accountability. This lawsuit adds to the ongoing debate about transparency and fairness within regulatory bodies.

SEC Filed Cases Against Big Corporates

The agency filed charges  against 16 firms, including major financial institutions like JPMorgan Chase and Goldman Sachs, for failing to maintain proper records of employee communications. These failures involved the widespread use of unofficial channels like personal devices for work-related communication.

While none of the firms admitted wrongdoing, they agreed to settle the charges by paying a combined total of over $1.1 billion in penalties. Additionally, they pledged to improve their compliance policies to ensure that all business communication is properly documented through official channels.

The SEC emphasized the importance of recordkeeping in maintaining trust and market integrity. Chair Gary Gensler stressed that clear communication channels and proper record-keeping are even more crucial as technology evolves.

The agency’s investigation revealed a pervasive pattern of “off-channel” communication, prompting them to require cooperation from the firms to gather missing communication records from employees’ personal devices. This included senior and junior personnel communications across various financial services sectors.

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