The largest United States cryptocurrency exchange, Coinbase, has filed lawsuits against the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) for failing to comply with information requests in closed crypto cases.
According to filings at the United States District Court for the District of Columbia, Coinbase seeks to compel the SEC and FDIC to comply with the Freedom of Information Act (FOIA) to respond to information requests from industry participants.
Coinbase Sues SEC and FDIC
Coinbase argues that the SEC has taken a new position, claiming sweeping authority over the growing crypto sector. While the SEC’s claims have no basis in securities laws, the agency has failed to explain properly and, instead, waged an enforcement war against crypto firms.
The exchange said the regulator’s joint effort with other financial watchdogs, like the FDIC, to de-bank crypto firms is aimed at crippling the digital asset industry.
Coinbase and professional services research firm History Associates have requested that the SEC prove its authority over the crypto space by providing records concerning three investigations into such firms and entrepreneurs. One of the investigations is focused on Ethereum’s native asset, Ether, which the SEC said was not a security in 2018.
Last week, the agency closed its investigation into Ethereum 2.0, the proof-of-stake network, suggesting that Ether is still not a security. Although the other investigations had been closed for years, the SEC withheld all records based on the three cases. Coinbase claims the refusals violated the regulator’s FOIA obligations.
“The SEC’s new, opaque, and shifting view of the securities laws deprives regulated parties of the fair notice demanded by due process, leaving them to guess whether the SEC might view their activities as securities transactions and decide to subject them to investigation, prosecution, and backward-looking penalties,” Coinbase insisted.
SEC’s Ongoing Suit Against Coinbase
Coinbase’s chief legal officer, Paul Grewal, further revealed that the FDIC stonewalled requests for letters telling financial institutions to pause crypto-related activities indefinitely. Interestingly, the FDIC’s Office of Inspector General has criticized such actions in the past, claiming that they would limit financial innovation and growth in the crypto space.
“This is no way to regulate. And this is no way to operate a transparent government. Today, we demand better from our financial regulators. We appreciate the Court’s attention to these important issues and look forward to sharing updates in the future,” Grewal stated.
Meanwhile, the SEC has an ongoing lawsuit against Coinbase, arguing that the firm operates an unregistered securities exchange.
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