Coinbase and History Associates team up to file lawsuit

On June 27, cryptocurrency exchange Coinbase and its advisory firm History Associates Incorporated announced a lawsuit against the U.S. Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC), accusing these institutions of failing to comply with the Freedom of Information Act. (FOIA) request.

In 2023, Coinbase hired History Associates Incorporated to assist in obtaining records from the SEC and FDIC. However, those requests were denied, forcing History Associates to now file a lawsuit against the two organizations to force them to hand over the relevant documents.

History Associates is named as a plaintiff in the lawsuit, while Coinbase is listed as a related party. According to the complaint, History Associates filed a FOIA request with the SEC on behalf of Coinbase in July 2023, requesting 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 find or identify any relevant information.

After History Associates appealed, the SEC acknowledged that the documents did exist but were protected by immunity rules. History Associates and Coinbase argue that these exemptions do not apply and that the court should require the SEC to release the information.

FOIA request for FDIC

In a separate FOIA request, Coinbase and History Associates sought documents related to any investigation involving Enigma MPC and EtherDelta founder Zachary Coburn. Both parties were issued cease-and-desist orders for alleged securities violations. The complaint states: “The SEC’s rationale for keeping confidential investigation documents from years of closed cases is to frustrate Coinbase’s legitimate need for these documents to understand the SEC’s legal basis for enforcement against the digital asset industry.”

In November 2023, History Associates also filed a FOIA request with the FDIC on behalf of Coinbase, seeking copies of all so-called "suspension letters" that require regulated financial institutions to "suspend all crypto-asset-related activities." The FDIC's Office of Inspector General confirmed the existence of the letters in an October 2023 report. However, the FDIC denied FOIA requests in January 2024 and again last month, and History Associates appealed, alleging that the FDIC violated federal disclosure regulations and asking the court to force the FDIC to turn over the documents.

Legal challenges to regulators

Coinbase is now engaged in three separate legal battles with the SEC. Coinbase filed a lawsuit against the SEC after the agency rejected its request for a formal rulemaking in 2022. The case is currently before the U.S. Court of Appeals for the Third Circuit. The SEC sued Coinbase in June 2023, accusing it of securities violations. Coinbase has largely failed in its bid to have the lawsuit dismissed, and the case has entered the discovery phase.

Paul Grewal, Coinbase’s general counsel, expressed dissatisfaction with the regulator’s approach in a post on X, emphasizing the importance of transparency in government operations and clear regulatory requirements for digital assets. Grewal emphasized: “Transparent government operations and clear regulatory requirements are crucial to the healthy development of the digital asset industry.”

The regulatory controversy behind

Coinbase’s legal action contends that the SEC and FDIC’s actions are a coordinated attempt to cut off the digital asset company from essential banking services. This is known as "Operation Chokepoint 2.0," a term used by the cryptocurrency industry to describe efforts by financial regulators to systematically restrict crypto businesses' access to important banking services.

History Associates stated in the legal filing: "In the past two years, various federal financial regulators, including the SEC, FDIC, and Federal Reserve Board, have used all their regulatory tools to try to weaken the digital asset industry. This FOIA lawsuit aims to reveal FDIC’s role in this illegal operation.” Coinbase believes that the refusal to share documents from the completed investigation is an intentional obstruction to understanding the legal framework under which these agencies’ enforcement activities are conducted.

The lawsuit reflects Coinbase’s ongoing battle with U.S. regulators and the larger debate over how digital assets are regulated. Coinbase hopes to promote regulatory transparency through legal means and ensure the healthy development of the digital asset industry within a legal framework.

This article is reproduced in cooperation with: CryptoCity

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