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A federal judge has urged Coinbase to reconsider its attempt to subpoena SEC Chairman Gary Gensler’s personal communications.
Judge Katherine Polk Failla, of the District Court for the Southern District of New York, said she was "sort of surprised and not in a good way" about Coinbase's subpoena request.
"I imagined that there was something I was missing," she said. "Let me note that counsel on both sides is very smart, very clever, they’re all very clever people…but 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,” she continued, adding that the “reservoir of credibility that [Coinbase] had built up with me throughout this litigation” had been drained.
In particular, Failla was unconvinced about Coinbase's request for documents from Gensler predating his term as SEC Chair. Coinbase attorney Kevin Schwartz claimed the regulator was “uniquely situated as a prominent voice on crypto’s regulatory status ” and SEC of obstructing a subpoena for “relevant communications on [Gensler’s] personal device.”
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SEC senior trial attorney, Jorge Tenreiro, argued that Gensler's communications before becoming chair were not relevant to the case.
In June, Coinbase told the SEC that it planned to subpoena Gensler's personal communications related to crypto over the duration of his term as chair, as well as four years before his appointment.
Later that month, the SEC described the subpoena request as an "improper intrusion" into Gensler's private life.
"Given also the utter lack of relevance of the requested documents, and the potential chilling effect on public service, the Court should quash the Subpoena and issue a protective order," lawyers for the SEC argued.
Coinbase then responded on 3 July by saying the subpoena was valid because Gensler is "not only the most prominent regulator, but also the most vocal academic commentator, concerning the regulatory status of digital assets and exchanges."
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"What Mr. Gensler was saying in his private communications about the regulatory status of digital assets, and what market participants were saying to him about these matters, is probative of the objective understanding of the public and market participants regarding what conduct the securities laws prohibit," Coinbase’s lawyers said.
"[A] document or communication need not be public to provide insight into the public's objective understanding as to what regulators require of them: agency personnel’s communications with market participants and interagency correspondence are all 'relevant to the fair notice defense.'"
Failla has now told Coinbase to file a motion to compel for a formal proceeding, through which both parties can state their arguments in more depth.
