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

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

As detailed by Inner City Press, the hearing showcased Coinbase’s persistent efforts to acquire Gensler’s communications, including statements made before he became SEC Chair in 2021.

Judge Skeptical of Coinbase’s Subpoena

Judge Failla stated, “I understood from the SEC’s opening submission that this request includes a period before his Chairmanship. You’ll have a hard row to hoe on that. I find your arguments speculative.”

Judge Failla: I understood from the SEC’s opening submission that this request includes a period before his Chairmanship. You’ll have a hard row to hoe on that. I find your arguments speculative.
Coinbase’s lawyer: Even the period when he’d been Chair, they say no

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

Coinbase’s legal team argued that they could not obtain necessary information from the SEC, prompting them to include Gensler’s pre-Chair communications to strengthen their fair notice defense. “Even the period when he’d been Chair, they say no. We tried to engage with Mr. Gensler and the SEC, but they’ve refused to say he didn’t use his personal device to communicate about crypto.”

However, Judge Failla dismissed this argument, stating, “I do not find that argument persuasive. Just keep that in mind.” She urged Coinbase’s legal team to reconsider their approach, noting, “I think you should cut your losses and go to your second point.”

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

Judge Failla: It does trouble me if you’ve been stonewalled. I’m saddened to learn that there is another motion forthcoming from you. I’ll be here for these motions.

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

The SEC’s legal representative, Jorge Tenreiro, argued against the subpoena, stating, “What they are asking for, from a public official, is incredibly intrusive. Officials have important duties. The cases look at the SEC’s actions, not the actions of one person. Before they ask us to pick up his personal phone, show us.”

Tenreiro emphasized that Gensler is neither a fact witness nor an expert witness on the law, arguing that the subpoena should be quashed.

Coinbase countered by citing a case where the Ripple court ordered the discovery of communications from 19 custodians, including then-Chair Jay Clayton. However, Tenreiro noted that the issue of personal devices had already been addressed in the Ripple case.

Judge Failla appeared sympathetic to the SEC’s position, remarking, “I do have strong views about the disproportionate burden of inquiry into Mr. Gensler’s statements before he became chair.”

Judge Directs Coinbase to File Motion to Compel

In closing, Judge Failla directed Coinbase to proceed with a motion to compel, setting a deadline for further scheduling discussions with the SEC, to which the exchange’s lawyer confirmed, “Certainly.”

Judge Failla: You do not appear to be withdrawing the subpoena. I’d prefer you begin with a motion to compel.
Coinbase’s lawyer: We’ll be glad to proceed that way.
Judge: Make a schedule with the SEC, offline. Letter by Monday?
Coinbase’s lawyer: Certainly.

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

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

On June 28, the agency asked the court to quash the subpoena against Gensler, a motion that Coinbase responded to on July 3 by asserting the relevance of his personal communications to its fair notice defense.