US Judge Suggests Coinbase to Modify Probe on US SEC Chair

Jimmy Aki
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Judge Katherine Polk Failla, who presided over the Securities & Exchange Commission (SEC) vs. Coinbase hearing on July 11, suggested that the Coinbase subpoena seeking access to SEC Chair Gary Gensler’s private communications before he led the commission should be modified.

US Judge Declares Shock Over Coinbase Subpoena Hearing

Judge Katherine Polk Failla expressed her disapproval over Coinbase’s attempt to subpoena SEC Chair Gary Gensler’s personal communications via emails, calling it “surprising and not in a good way.”

Presiding over the District Court for the Southern District of New York, Judge Failla held a hearing on short notice following US SEC attorneys’ request to block Coinbase’s subpoena directed at Gensler.

Judge Failla took particular issue with Coinbase’s request for documents from Gensler that predate his tenure as SEC chair.

However, Coinbase’s exchange attorney argued that the SEC had refused to discuss the full scope of documents Coinbase might have, asserting that Gensler’s communications were relevant to the case.

The exchange’s attorney emphasized that these communications could shed light on Gensler’s perspectives and biases.

In contrast, Jorge Tenreiro, an SEC senior trial attorney, argued that Gensler’s communications before he became chair were irrelevant to the case, noting that the SEC Chair is neither a fact witness nor an expert witness.

He further argued that a potential green light to the Coinbase subpoena request could set a problematic precedent for future cases involving high-ranking officials’ personal communications.

Judge Failla indicated that she was inclined to agree with the SEC’s position that the requests were inappropriate and potentially overreaching.

However, it also acknowledged the need for further discussion and urged both parties to collaborate on a briefing schedule.

Rather than proceeding with the SEC’s motion to quash the subpoena, Judge Failla suggested that Coinbase filed a motion to compel, allowing the court to address the matter through a more structured legal process and submit an official letter to that effect on July 15.

Deep Dive into the Genesis of Coinbase Subpoena

The Coinbase subpoena for the SEC Chair’s personal email was part of the crypto exchange clapback in the commission’s enforcement case, which was filed on June 6, 2023.

The regulator alleged that Coinbase had been operating as an “unregistered securities broker and clearing agency,” thus violating US securities laws. It should be noted that this has elicited debates about the classification of crypto assets as either securities or commodities, although the CFTC Chair Rostin Behnam reaffirmed cryptocurrencies as commodities.

In April 2024, the crypto exchange initially served the SEC with requests for document production. By June, Coinbase informed the US regulator of its intention to probe Chair Gary Gensler’s personal communications, which also entailed private emails related to crypto, covering both his tenure and the four years before he was appointed as Chairman.

On June 28, the SEC filed a response letter that sought to denounce the subpoena request as an “improper intrusion” into Gensler’s private life. The regulator argued that the Coinbase subpoena should be directed at the commission rather than individual employees.

Coinbase’s legal team countered with strong arguments on July 3, asserting that it was fair to investigate Gensler’s personal communications, noting that he is the most prominent regulator and also expresses his personal views in public, distinguishing them from official SEC positions.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.