Crypto exchange Coinbase filed two lawsuits against the U.S. Securities and Exchange Commission and the Federal Deposit Insurance Corporation for not complying with Freedom of Information Act requests and has asked a court to force those agencies to comply. 

Coinbase, which retained consultant firm History Associates Inc. to file the FOIA requests, took aim at the SEC and FDIC in lawsuits filed in the U.S. District Court for the District of Columbia on Thursday, accusing federal financial regulators of trying to cut off the crypto industry from the banking sector. FOIA requests, made under the Freedom of Information Act, allow for the public to ask for records from any federal agency. 

"For nearly two years, a wide array of federal financial regulators — including the Securities and Exchange Commission, the FDIC, and the Federal Reserve Board — have used every regulatory tool at their disposal to try to cripple the digital-asset industry," according to the complaint filed against the FDIC. "This FOIA lawsuit seeks to bring to light the FDIC’s role in that unlawful scheme."

The SEC and FDIC declined to comment. 

Requests sent to the SEC

The FOIA requests sent to the SEC asked for information about how the agency views ether, according to the complaint. Blockchain software firm Consensys raised this in a lawsuit it lodged against the SEC last month and said the SEC's Director of the Division of Enforcement, Gurbir Grewal, approved the investigation into "Ethereum 2.0" in March 2023 to investigate individuals and entities buying and selling ether. The firm later said that the SEC said it was closing its investigation into Ethereum 2.0.  

History Associates specifically asked for "access to all copies and records concerning Ethereum's shift to a proof-of-stake consensus mechanism," and said that the SEC denied the request and later denied their appeal. 

History Associates also filed FOIA requests on two now-closed investigations, one involving Zachary Coburn and another for Enigma MPC. The firm asked for "records… reflecting or concerning any investigation" involving the two. Enigma MPC is a data encryption startup that settled with the SEC in 2020 after the agency said tokens offered by the firm were securities, thereby violating securities laws. In the other case, Coburn created an online platform for trading crypto called Ether Delta, which the SEC said met the definition of an exchange and should have been registered. Coburn settled with the SEC in 2018. 

History Associates said following appeals, the SEC denied the requests and said the disclosure "could be reasonably expected to cause harm to the related, ongoing and active enforcement proceedings," according to the complaint. 

"The SEC’s rationale for withholding documents from investigations that concluded in settlements years ago is tailor-made to frustrate the legitimate purposes for which Coinbase sought the Coburn and Enigma MPC documents in the first place — to understand the view of the law that underlies the SEC’s enforcement blitzkrieg against the digital-asset industry," Coinbase said in the complaint. "The SEC’s stonewalling violates its FOIA obligations."

Put on pause

In the complaint against the FDIC, Coinbase said History Associates sent FOIA requests on the agency's "pause letters." The FDIC began issuing "pause letters" between March 2022 and May 2023 to some financial institutions asking them to not expand crypto-related activities and provide more information, according to a 2023 report from FDIC's Office of Inspector General. That office is tasked with evaluating the FDIC. 

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The agency didn't give a time frame for reviewing that information, which in turn could create uncertainty and risk, the inspector general said in that report. 

Coinbase said the letters were part of a new incoming Operation Choke Point 2.0, in its complaint.

"The Pause Letters weren’t a good-faith effort to supervise the crypto-related activities of financial institutions," the complaint read. 'They were a transparent effort to stop those activities altogether — part and parcel of the FDIC’s and other regulators’ scheme to cut off digital-asset firms from necessary banking services."

History Associates submitted FOIA requests looking for copies of all the Pause Letters mentioned in the OIG report. They were denied by the FDIC. The agency later said that revealing the letters would “necessarily reveal information about the particular banks that the letters were sent to and would intrude into the heart of the communications between financial institutions and their regulator," according to the complaint. 

Sparring over rules

Coinbase has fired back at regulators before. The crypto exchange sued the SEC in April 2023 in a bid to force the agency to provide a yes or no answer to the exchange's petition for rulemaking for the crypto industry. The two have been at odds over the past few years over the need for rulemaking. 

Coinbase first asked the SEC to issue a formal rulemaking process to "provide guidance for the crypto industry" in July 2022. Although the SEC has not introduced crypto-specific regulations, it has proposed rules in the past year that apply to crypto. For instance, the SEC revisited a custody rule, mandating that registered investment advisors store crypto with a qualified custodian, who must adhere to specific requirements. Coinbase has countered and said the SEC's rules are "ill-fitting."

The SEC has also brought enforcement actions against crypto platforms and projects over the past year. The agency sued Coinbase in a separate case last year for operating its platform without registering.

Meanwhile, the crypto industry has criticized the SEC for what many call "regulation by enforcement," while SEC Chair Gary Gensler has argued that most cryptocurrencies are securities and should be regulated similarly to other investments.

Updated at 12:30 UTC on June 27 to include that the FDIC and SEC declined to comment