A major dispute has broken out between Coinbase and the U.S. Securities and Exchange Commission (SEC). Coinbase has accused the regulator of permanently destroying important text messages from former SEC Chair Gary Gensler. According to court filings, nearly a full year of Gensler’s messages, from October 2022 to September 2023, are gone.
This period was one of the most critical in the history of cryptocurrency regulation. It was when the SEC was intensifying its enforcement efforts and the crypto world was reeling from the collapse of major players like FTX. The disappearance of these communications has raised serious questions about transparency and accountability inside the SEC.
The issue came to light after a report by the SEC’s own Office of the Inspector General. The report revealed that the agency uses a policy of remotely wiping mobile devices that remain disconnected from the SEC’s internal network for more than 45 days. As a result, text messages belonging to Gensler and dozens of other senior officials were erased.
Coinbase says that the destroyed messages could have contained vital information. The company has asked a federal court to sanction the SEC, order an immediate production of remaining records, and grant expedited discovery.
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Coinbase Pushes for Sanctions
In its filing, Coinbase described the SEC’s conduct as a “destroy-and-delay” approach. The company argued that this has caused harm that cannot be undone, especially as it battles the regulator in court. Coinbase Chief Legal Officer Paul Grewal said the Inspector General’s findings prove that “the Gensler SEC destroyed documents they were required to preserve and produce.”
Coinbase also highlighted what it sees as double standards. The SEC has imposed large fines on private firms for failing to properly keep records. Now, the regulator itself stands accused of failing to protect its own communications. This contradiction, according to industry observers, could damage the SEC’s credibility in future cases.
Industry analyst Rishabh Gupta, Director at Trade Dog Group, said the situation creates a major “do as I say, not as I do” problem for the regulator. He added that such lapses undermine the SEC’s moral authority when it comes to enforcing rules on private companies.
The timing of the deletions has raised even more concerns. The texts were lost during an intense period of enforcement actions against the crypto industry, alongside ongoing Freedom of Information Act (FOIA) lawsuits. In one such case, Coinbase had requested access to the SEC’s internal communications about Ethereum and digital asset policies. Those requests were initially denied under law enforcement exemptions, but the SEC later dropped its objections after Coinbase went to court.
The Inspector General’s report also flagged potential data losses from more than 40 other senior officials at the SEC. Twenty-one of these devices were confirmed or suspected to have suffered data destruction.
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Questions of Transparency and Trust
The loss of these records has triggered a wave of concern across the financial and crypto industries. Critics argue that regulators are supposed to set the highest standard for fairness and responsibility. When their own actions raise doubts, it undermines the trust that businesses and the public place in them.
Legal experts say the erased texts could become a powerful argument for companies facing enforcement actions. If courts decide to impose sanctions on the SEC, it would not only affect ongoing cases but also challenge the regulator’s methods of handling sensitive evidence. This could make it harder for the agency to push its claims or negotiate settlements with firms under investigation.
Crypto executive Shiv Pande, Chief Business Officer at BitSave, said the reported erasure raises serious questions around transparency and accountability. He noted that regulators carry a heavy responsibility to ensure their decisions are rooted in fairness and objective evidence.
For now, Coinbase is pressing ahead with its demand that the SEC turn over all remaining communications and accept penalties for the records that were lost. The exchange insists that the regulator must be held to the same standard it enforces on the private sector.
The revelations have added another layer of tension to the already strained relationship between the crypto industry and U.S. regulators. With nearly a year of missing texts from Gary Gensler and other top officials, the fight over transparency is far from over.