Judge Criticizes Coinbase’s Attempt to Subpoena SEC Chair Gary Gensler

In a hearing on July 11, Judge Catherine Polk Failla expressed skepticism about Coinbase’s efforts to subpoena SEC Chairman Gary Gensler in the SEC’s ongoing case against the cryptocurrency exchange.

As Inner City Press reported, the hearing showed Coinbase’s ongoing efforts to capture Gensler’s connections, including statements he made before becoming SEC chairman in 2021.

Judge Skeptical of Coinbase Subpoena

Judge Failla stated, “I understand from the SEC’s opening brief that this motion includes a period before he becomes chairman of the SEC. You will have a very difficult time with that. I find your arguments speculative.”

Judge Failla: I understand from the SEC’s opening brief that this motion includes a period before he becomes chairman. You will have a very difficult time dealing with this. I find your arguments speculative.
Coinbase Lawyer: Even When He Was Chairman, They Said No

— Inner City Press (@innercitypress) July 11, 2024

Coinbase’s legal team claimed they were unable to obtain the necessary information from the SEC, prompting them to include Gensler’s communications prior to his tenure as chairman to bolster their fair notice defense. “Even while he was chairman, they said no. We tried to reach out to Mr. Gensler and the SEC, but they refused to say he did not use his personal device to communicate about cryptocurrency.”

But Judge Failla rejected that argument, saying, “I don’t find that argument compelling. Just keep that in mind.” She urged Coinbase’s legal team to reconsider their approach, noting, “I think you should cut your losses and move on to point two.”

Coinbase argued that Gensler’s unique role in shaping public understanding of cryptocurrencies justified the inclusion of his communications. In response, Judge Failla acknowledged the potential difficulty Coinbase faces.

Judge Failla: I am disturbed that your motion has been blocked. I am saddened to learn that another motion is coming from you. I will be here for those motions.

— Inner City Press (@innercitypress) July 11, 2024

The SEC’s legal representative, Jorge Tenrero, argued against the subpoena, saying, “What they are asking of a public official is very intrusive. Officials have important duties. The cases are looking at the actions of the SEC, not the actions of an individual. Before they ask us to pick up his personal phone, show it to us.”

Tenrero asserted that Gensler is neither a fact witness nor an expert witness in law, and argued that the subpoena should be dismissed.

Coinbase responded by pointing to a case in which a court ordered Ripple to discover communications from 19 trustees, including then-president Jay Clayton. However, Tenrero noted that the personal device issue had already been addressed in the Ripple case.

Judge Failla appeared sympathetic to the SEC’s position, saying, “I have strong views about the disproportionate burden of investigating Mr. Gensler’s statements before he became chairman.”

Judge directs Coinbase to file motion to compel

In conclusion, Judge Failla directed Coinbase to proceed with a mandatory motion, and set a deadline for further scheduled discussions with the SEC, to which the exchange’s attorney confirmed, “Absolutely.”

Judge Failla: It doesn’t seem like you’re withdrawing the summons. I would have preferred you to start with a mandatory motion.
Coinbase Attorney: We’d be happy to move forward that way.
Judge: Set up a schedule with the SEC, offline. Will a letter be sent by Monday?
Coinbase Attorney: Sure.

— Inner City Press (@innercitypress) July 11, 2024

The origins of this dispute date back to June, when Coinbase requested documents and communications regarding Gensler’s public comments on digital assets, platforms, and storage services from May 2021 to September 2023. Coinbase’s request also included 33 other requests for documents and communications related to the SEC’s actions.

On June 28, the agency asked the court to dismiss the subpoena against Gensler, a motion that Coinbase rejected. She replied On July 3, he stressed the importance of his personal communications in his defense of fair notice.