Did The SEC Just Destroy Its Own Evidence? Coinbase Demands Sanctions Over Missing Gensler Texts

Coinbase Pushes Court to Sanction SEC Over Lost Gensler Text Messages

Coinbase has intensified its legal dispute with the U.S. Securities and Exchange Commission, urging a federal court to impose sanctions after nearly a year of text messages from former Chair Gary Gensler were permanently deleted.

The exchange argues that the loss of these communications undermines transparency, violates court orders, and obstructs public understanding of the regulator’s decision-making during a critical period for the crypto industry.

Why Missing Gensler Messages Matter for Crypto Oversight

The deleted texts, covering October 2022 to September 2023, coincide with major developments in the cryptocurrency market, including the collapse of FTX, Ethereum’s transition to proof of stake, and a wave of enforcement actions targeting exchanges such as Coinbase.

Lawyers for History Associates, a research group working with Coinbase under the Freedom of Information Act, say the lost messages could have revealed how the SEC debated strategies, enforced regulations, and shaped policies toward digital assets.

Device Policy Blamed for Wiping Crucial Records

An investigation by the SEC’s Office of Inspector General (OIG) found that the messages were lost due to an internal policy that automatically wiped devices disconnected from the agency network for more than 45 days.

The report noted that many of the deleted messages would have qualified as official federal records.

The OIG identified systemic failures, including poorly tested device management protocols, weak backup systems, and missed alerts that should have prevented the loss.

Investigators also flagged more than 40 devices belonging to other senior officials, with 21 confirmed or suspected of data destruction.

Coinbase Alleges Regulatory Failures and Seeks Court Action

In its court filing, Coinbase claims the SEC delayed the disclosure of the missing messages and carried out narrowly defined searches that failed to comply with legal obligations.

The company argues that the omissions violate Freedom of Information Act requirements and discovery rules, creating “irreparable harm” to its ability to understand the SEC’s internal deliberations.

Coinbase Chief Legal Officer Paul Grewal highlighted the issue on X, tweeting:

“The Gensler SEC destroyed documents they were required to preserve and produce. We now have proof from the SEC's own Inspector General.”

Potential Consequences for the SEC

Legal experts note that courts treat the destruction of evidence seriously, particularly when it occurs after formal requests for records.

Sanctions could include additional searches, restrictions on the SEC’s arguments in litigation, or expedited production of remaining records.

Coinbase is pressing for expedited discovery to determine the full extent of the record loss, what steps the SEC has taken to recover the communications, and why the deletions were not promptly disclosed to investors.

Regulator Faces Credibility Questions Amid Crypto Enforcement

Industry voices warn that the lost messages threaten the SEC’s credibility, particularly as the agency has fined private firms billions for recordkeeping violations while facing similar accusations itself.

Rishabh Gupta, Director at Web3 platform Trade Dog Group, said:

“This creates a profound ‘do as I say, not as I do’ problem that severely undermines the SEC’s moral authority.”

Shiv Pande, CBO at crypto startup BitSave, added:

“Regulatory positions carry the heavy responsibility of gatekeeping, where decisions must be anchored in fair principles and objective evidence.”

The deletion period coincided with heightened scrutiny over Ethereum, the fallout of FTX, and Coinbase’s own legal challenges.

By pressing the court, Coinbase aims to hold the SEC accountable, arguing that the agency should not benefit from avoidable losses of critical communications.

Court Ruling Could Shape Future Enforcement Battles

If sanctions are imposed, experts warn it could set a precedent allowing companies to challenge the SEC’s credibility and the thoroughness of its evidence in future cases, potentially complicating enforcement actions and negotiations.

The court is expected to determine the next steps in the coming weeks, with outcomes likely to influence both the SEC’s transparency practices and the broader regulatory approach to digital assets.