Coinbase and History Associates Team Up to File Lawsuit
On June 27th, cryptocurrency exchange Coinbase and its consulting firm, History Associates Incorporated, announced that they have filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC), alleging that these institutions have failed to comply with the requirements of the Freedom of Information Act (FOIA).
In 2023, Coinbase hired History Associates Incorporated to assist in obtaining records from the SEC and FDIC. However, these requests were all denied, prompting History Associates to now file a lawsuit against both institutions to compel them to turn over the relevant documents.
In the lawsuit, History Associates serves as the plaintiff, while Coinbase is listed as an interested party. According to the complaint, in July 2023, History Associates filed a FOIA request on behalf of Coinbase to the SEC, seeking documents regarding the SEC’s views on Ethereum (ETH) and its legal status. However, the SEC rejected the request in October 2023, claiming that it could not locate or identify any relevant information.
After History Associates appealed, the SEC acknowledged the existence of these documents, but claimed they were protected by exemption rules. History Associates and Coinbase argue that these exemptions do not apply, and the court should compel the SEC to disclose this information.
FOIA Request against FDIC
In another FOIA request, Coinbase and History Associates sought investigation documents related to Enigma MPC and EtherDelta founder Zachary Coburn, who both have been issued cease-and-desist orders for alleged securities violations. The complaint states, “The SEC has kept secret investigation files that have closed for years, in an attempt to frustrate Coinbase’s legitimate demand for these files to understand the legal basis for SEC enforcement in the digital asset industry.”
In November 2023, History Associates also filed a FOIA request on behalf of Coinbase to the FDIC, seeking copies of all so-called “cease and desist letters” that demanded regulated financial institutions to “cease all activities related to cryptocurrency assets.” The FDIC’s Office of Inspector General confirmed the existence of these letters in a report in October 2023. However, the FDIC denied the FOIA request again in January 2024 and last month. History Associates appealed, accusing the FDIC of violating federal disclosure regulations and requesting the court to compel the FDIC to produce these documents.
Legal Challenges against Regulatory Agencies
Coinbase is now engaged in three separate legal battles against the SEC. After the SEC rejected its formal rulemaking petition in 2022, Coinbase filed a lawsuit against the agency. The case is currently being heard in the United States Court of Appeals for the Third Circuit. In June 2023, the SEC sued Coinbase, accusing it of securities violations. Coinbase has mostly been unsuccessful in getting the lawsuit dismissed, and the case has entered the discovery phase.
Paul Grewal, Coinbase’s Chief Legal Officer, expressed dissatisfaction with the regulatory agencies in a post on X, emphasizing the importance of transparent government operations and clear regulatory requirements for the healthy development of the digital asset industry. Grewal emphasized, “Transparent government operations and clear regulatory requirements are crucial for the healthy development of the digital asset industry.”
Regulatory Controversy Behind the Scenes
Coinbase’s legal lawsuit claims that the actions of the SEC and FDIC are a coordinated attempt to cut off digital asset companies from essential banking services. This is referred to as “Operation Chokepoint 2.0,” which the cryptocurrency industry uses to describe the systematic efforts of financial regulatory institutions to restrict access to important banking services for crypto businesses.
History Associates stated in legal documents, “Over the past two years, various federal financial regulatory agencies, including the SEC, FDIC, and Federal Reserve, have used all of their regulatory tools in an attempt to weaken the digital asset industry. This FOIA lawsuit aims to expose the role of the FDIC in this unlawful action.” Coinbase believes that the refusal to share completed investigation files is a deliberate impediment to understanding the legal framework on which these institutions’ enforcement activities are based.
This lawsuit reflects Coinbase’s ongoing struggle with U.S. regulatory agencies and the larger debate surrounding how to regulate digital assets. Coinbase hopes to promote regulatory transparency and ensure that the digital asset industry develops within a legal framework through legal means.
This article is a collaborative reprint from CryptoCity.