A New York judge has allowed some parts of crypto exchange Coinbase's motion to require the U.S. Securities and Exchange Commission to hand over documents. However, the exchange's move to subpoena Chair Gary Gensler was thrown out.
In July, the crypto exchange filed a motion to compel Gensler and the SEC to provide documents that Coinbase says are at the heart of its litigation with the agency. A judge approved and denied parts of that motion in an order filed on Friday.
"For the reasons stated on the record during the telephonic conference held on September 5, 2024, the Court GRANTS IN PART and DENIES IN PART Defendants’ motion to compel," said U.S. District Judge Katherine Polk Failla in her order dated on Thursday.
The SEC and Coinbase have been embroiled in a lawsuit since last year when the agency sued Coinbase for operating its platform without registering. Coinbase then moved to dismiss that lawsuit, but U.S. District Judge Katherine Polk Failla of New York later shut down the company's attempt. The lawsuit is now in the discovery process.
Coinbase had asked the court to compel the agency to produce certain documents related to the tokens that were a part of the SEC's complaint, documents concerning the SEC's deliberation of Coinbase becoming a public company in April 2021 and statements that Gensler made personally and professionally during his time at the SEC.
Judge limits Coinbase subpoena scope
Coinbase previously served Gensler a subpoena in June, asking the chair to produce documents concerning his private emails that the exchange said were relevant to its ongoing case with the SEC. Those documents included statements about crypto from 2017 to the present, covering the four years before Gensler was sworn in in 2021. That had since been slimmed down to only information related to Gensler's time leading the agency and not before then. The SEC will not have to address that subpoena, according to a source very familiar with the case.
Coinbase withdrew its request for Gensler's personal communications but did that "on the basis of an explicit representation that SEC counsel made to Judge Failla herself," said Coinbase Chief Legal Officer Paul Grewal in an interview with The Block.
"The SEC has represented, under penalty of perjury for all practical purposes, that Gary Gensler has not used any personal communication channels to conduct SEC business," Grewal said. Therefore, there was no reason to pursue that, Grewal added.
Documents related to whether the tokens met the Howey Test were narrowed down in the order, the source familiar said. Coinbase had asked for the SEC to "run a preliminary search on non-Enforcement files and provide a hit report so it could try to address the SEC’s unsubstantiated burden claims," from top leadership at the SEC and from current and past SEC commissioners. The agency had offered five SEC staff members.
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Judge Failla said the SEC needs to search for more than the five proposed, but not all that Coinbase had requested. The judge also excluded current and former commissioners from that list, according to the source.
The SEC also doesn't have to turn over internal documents unless there are external attachments, the person familiar said.
Failla also granted the SEC's motion to "permanently file under seal" some redactions, according to the order.
Coinbase's Grewal said Judge Failla's order would result in key documents that can be used in their defense. Judge Failla ordered "huge discovery into internal memorandum and other documents reflecting the SEC's Howey analysis," he said.
"Today Judge Failla ruled from the bench on our motion to compel @SECGov to provide key information for the defense of our case," Grewal said in a post on X on Thursday. "In short, the Court ordered the SEC to produce important discovery. I’ll share the full transcript when we have it, so you can read it for yourself. In the meantime, we thank the Court for its careful consideration."
Though Coinbase withdrew one request, the exchange still gets what it has been looking for, Grewal said.
"While it may be the case that we withdrew one particular request, and the judge recognized certain reasonable limits, this was an order granting the heart of the discovery that we have been seeking for months," Grewal said in the interview.
Update: Sept. 6, 5:40 p.m. UTC to include details throughout
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