Federal Judge Katherine Polk Failla has urged crypto exchange Coinbase to solidify its arguments to subpoena SEC Chief Gary Gensler’s personal communication records.
Coinbase’s subpoena is in connection with discovery in the SEC’s case against the exchange filed in June 2023. The agency alleged that Coinbase functioned as an “unregistered securities broker” since 2019 and violated US securities laws.
Specifically, Coinbase is looking to get access to data on Gensler’s personal devices. This comes on the heels of the SEC not providing any explicit details on his communications with market makers.
Coinbase wants to get hold of documents about crypto from 2017 until now. For context, Gensler was sworn in as the SEC Chair only in 2021. The SEC has labeled the exchange's demand as an "improper intrusion into a public official's private life."
The judge asserted that she was "actually quite surprised by the request" made to Gensler. At the end of the hearing, after lawyers from both sides made their case, she said that she still felt that Coinbase's request was inappropriate.
Commenting on the current state of affairs, she said,
"I imagined that there was something I was missing. I was kind of surprised and not in a good way. I found the arguments at least as articulated in the July 3rd response to border on the fatuous. I was not moved by basically any of the arguments.”
The judge's concern with Coinbase's request underlines that the focus should be on Gensler's conduct and communications in his official capacity as Chair, rather than on documents from before he assumed an official office position.
Lawyers representing Coinbase brought to light that the SEC has outrightly refused to chew over potential documents Coinbase could have. They are merely focusing on the relevance of Gensler's communications to the case, rather than getting involved in a broader discussion.
The SEC lawyers continue to contend that the SEC Chair is neither a fact nor an expert witness in the case. This, in turn, could set a concerning precedent for other cases in the going forward.
Even though the judge did not sideline Coinbase, she decided to give the exchange another shot. Instead of fostering the SEC’s motion to quash, the judge has asked the exchange to file a motion to compel and argue in depth why the court should favor Coinbase's demand.
