SEC pays $150k to settle Coinbase suit over destroyed Gensler texts
The SEC will pay $150,000 to Coinbase to end a dispute over destroyed text messages, handing the crypto industry a symbolic victory over the agency's recordkeeping standards during its prior regulatory crackdown.
Coinbase has settled its Freedom of Information Act lawsuit against the Securities and Exchange Commission. Under the agreement, the SEC will pay $150,000 and commit to repairing its record-retention policies. Chief legal officer Paul Grewal disclosed the terms in an op-ed on Wednesday.
The dispute centered on missing text messages from former Chair Gary Gensler. Coinbase had sought records in 2023 to understand how the agency decided to classify cryptocurrencies as securities, the same issue underlying the enforcement suit the SEC filed against the exchange that June. The SEC denied the requests, prompting litigation.
An investigation by the SEC’s own inspector general revealed that nearly a year of Gensler’s texts—from October 2022 to September 2023—were wiped when the agency reset his phone before performing a backup. That period encompassed the collapse of FTX and the regulator's most aggressive actions against crypto trading platforms. Of the messages that were eventually recovered, 38% related to agency business, including a May 2023 discussion about the timing of enforcement actions.
The destruction of the messages created a stark contradiction for the agency. Under Gensler, the SEC levied more than $1 billion in fines against financial firms for failing to preserve employee communications. Grewal noted the irony of this posture, pointing out that the agency had long insisted that “everybody should play by the same rules.”
“The Gensler SEC destroyed documents they were required to preserve and produce,” Grewal wrote. “We now have proof from the SEC’s own Inspector General.”
For investors and crypto executives, the $150,000 penalty is negligible for a company of Coinbase's scale. The settlement's actual value is narrative. By forcing the agency to admit its recordkeeping failures, Coinbase has cemented a powerful talking point for the broader industry.
The exchange positioned its FOIA request and related transparency suits against the FDIC as evidence that regulators targeted the digital asset sector through enforcement rather than established rulemaking. This argument ultimately gained traction. The SEC's case against Coinbase was dropped in early 2025 under a new administration and a new chair.
The resolution marks the end of a turbulent chapter for the exchange. Grewal, the legal architect who guided Coinbase through its prolonged battles with Washington, is set to depart the company at the end of July.
