Crypto exchange Coinbase (NASDAQ:COIN) and the US Securities and Exchange Commission (SEC) have been clashing with each other during the last few weeks on Coinbase’s subpoena requesting for SEC Chairman Gary Gensler’s personal communicatons and other details from a period prior to him being appointed as the SEC’s chairperson back in 2021.
Presiding Judge Katherine Polk Failla was not too receptive when it came to arguments made by Coinbase for this particular subpoena during a recent hearing that was held on Thursday (July 11, 2024).
The crypto exchange’s recent arguments have apparently not convinced US District Judge Katherine Polk Failla of New York to subpoena SEC Chairman Gensler (during a court hearing on July 11 to settle any differences).
Coinbase had reportedly served Gensler with a subpoena back in June 2024 and had requested the SEC chairman to provide documents reportedly pertaining to personal communications that the digital asset exchange stated were relevant or important to the ongoing case.
This may include various documents/information related to crypto from 2017 up until now, spanning the 4 years prior to when Gensler assumed the role of SEC Chair back in 2021.
Notably, the SEC had submitted a protective order, noting that the subpoena needs to have been targeted at the SEC itself, and not to Gensler. The regulator has referred to Coinbase’s subpoena as an “improper intrusion into a public official’s private life.”
Recently, Coinbase’s legal team had argued, as part of a July 3 letter to Judge Failla, that Gary Gensler’s private communications on crypto may be considered an “appropriate” source of discovery.
US Judge Failla stated:
“I was sort of surprised, and not in a good way, by the July 3 response.”
Her comments came during a pre-trial motion conference that was held on July 11, 2024. Judge Failla added that she had certain concerns, such as Coinbase’s argument regarding Chair Gensler’s personal emails (and his right to privacy).
Judge Failla also stated that she was “not moved by basically any of the arguments.”
She went on to state that it would be a good idea if Coinbase were to file a motion to convince her, however, she did not appear to be too encouraged/motivated by the firm’s latest efforts for a subpoena.
She remarked:
“There might be some amazing argument that’s being held in reserve by defense counsel, but at the moment, I didn’t see it in the submission that was given to me. … I actually reacted to this response by thinking that defense counsel was spending an amount, perhaps not an inconsiderable amount of the resevoir of credibility that they have built up with me throughout this litigation.”
It’s worth noting that Coinbase and the SEC (along with Chair Gary Gensler) have been actively involved in the lawsuit for the past year (when the regulator had filed a lawsuit against the crypto exchange).
The SEC’s lawsuit accuses Coinbase of running its digital assets platform without being properly registered.
Coinbase had attempted to dismiss this particular lawsuit, however, its request was denied by Judge Failla back in March of this year.
The US Judge had stated that the SEC had “sufficiently pleaded” that Coinbase had been doing business as an exchange operator, broker, and clearing agency. The firm had also allegedly taken part in the unregistered sale of securities via its staking program.
But the Judge did actually dismiss an assertion pertaining to Coinbase’s digital wallet app.
Kevin Schwartz, a legal representative of Coinbase, stated that the firm had attempted to work cooperatively with the SEC. However, it was dealing with certain difficulties.
Schwartz has shared:
“We’re unable to get information from the SEC, we’ve been unable to even have a constructive discussion about ascertaining what information exists and to get from Mr. Gensler in his personal capacity on these same issues.”
The Judge stated that she was really concerned about these ongoing exchanges between Coinbase and the SEC.
Notably, the SEC’s legal representative, Jorge Tenreiro, said that the subpoena was “entirely” inappropriate.
As part of a letter submitted last month, the SEC stated that the subpoena was really burdensome and may be an overreach.
The SEC had noted that it is “incalculably intrusive and harassing to search a citizen’s communications with friends, colleagues, or even the press in his spare time.”