In a dramatic escalation of the crypto regulatory feud, Coinbase has accused the Securities and Exchange Commission (SEC) of wiping out key evidence in its enforcement drive. The cryptocurrency giant has urged the U.S. District Court for the District of Columbia to impose sanctions on the SEC for the destruction of nearly a year of text messages from former Chair Gary Gensler during the height of the agency’s cryptocurrency enforcement actions.
The Coinbase court filing reveals how the SEC permanently erased Gensler’s digital communications spanning October 2022 through September 2023 — a critical period that witnessed FTX’s spectacular collapse, Ethereum’s major technical overhaul, and an unprecedented wave of enforcement actions against digital asset platforms.
Regulatory Record Keeping Controversy
The SEC’s own internal watchdog delivered damning findings that exposed systematic failures in the agency’s document preservation protocols. The Office of Inspector General confirmed that automatic device policies wiped Gensler’s phone after remaining offline for 45 days, permanently destroying communications that federal law requires agencies to preserve as public records.
More troubling revelations emerged showing that over 20 senior SEC officials may have lost similar communications, suggesting the problem extends far beyond Gensler’s deleted messages. The inspector general’s investigation uncovered inadequate backup systems and widespread compliance failures across the agency’s leadership ranks.
“The SEC failed to search text messages despite court orders requiring production of all documents and communications,” attorneys for History Associates argued in Thursday’s filing, which Coinbase actively supports through the ongoing Freedom of Information Act litigation.
Crypto Industry Warns of Growing Regulatory Overreach
Industry observers note the timing coincides perfectly with the SEC’s aggressive “regulation by enforcement” strategy that Coinbase has repeatedly challenged in court. During the deleted message period, the agency launched multiple high-profile cases against cryptocurrency exchanges while refusing to provide clear regulatory guidance for digital assets.
The missing communications could have revealed internal deliberations about enforcement priorities, strategic timing decisions, and coordination between senior officials during pivotal moments in cryptocurrency regulation. Legal experts emphasize that federal judges treat evidence destruction with extreme seriousness, particularly when records vanish after formal discovery requests.
A court ruling on this could change crypto lawsuits
Potential sanctions range from ordering comprehensive additional searches to restricting the SEC’s courtroom arguments in ongoing cryptocurrency cases. However, federal judges typically examine whether document destruction was intentional before imposing severe penalties.
Coinbase’s legal strategy aims to expose what the company characterizes as systematic transparency failures that undermine due process rights. The cryptocurrency exchange argues courts should not permit regulators to benefit from what it calls “avoidable loss of key communications.”
The court’s forthcoming decision could significantly impact ongoing cryptocurrency litigation nationwide. A ruling favouring sanctions would intensify pressure on the SEC’s already controversial enforcement approach, while a decision supporting the regulator might further inflame industry criticisms about inadequate accountability mechanisms.
This developing story highlights broader tensions between rapidly evolving financial technology and traditional regulatory frameworks struggling to adapt to digital asset innovation.
