Judge Criticizes Coinbase Over Gensler Subpoena Request

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• The judge overseeing the Coinbase vs. SEC case has blocked Coinbase’s subpoena request for Gary Gensler’s personal communications
• Judge Katherine Failla described the supporting arguments as “fatuous”
• She permitted Coinbase to file a motion to compel, allowing further exploration of its arguments

The federal judge overseeing a legal dispute between Coinbase and the US Securities and Exchange Commission (SEC) has said that she was “surprised and not in a good way” over the company’s attempt to subpoena its Chair, Gary Gensler. Coinbase had demanded access to Genseler’s personal communications, but during a hearing Thursday, Judge Katherine Failla, of the District Court for the Southern District of New York, blocked the demand at the SEC’s request, calling the arguments supporting it “fatutous.” She did, however, allow Coinbase to file a motion to compel so that its arguments could be explored further.

Judge Faila “Quite Surprised” by Coinbase Request

Coinbase’s request came as part of its lawsuit, filed by the SEC last june, which accuses Coinbase of selling securities without registering. Thursday’s hearing was convened after SEC attorneys requested Judge Faila to block Coinbase’s subpoena, which was directed at Gensler in his personal capacity.

Judge Failla remarked at the beginning of the session that she was “actually quite surprised by the request,” adding that she “imagined that there was something I was missing.” A key issue raised by Judge Failla was Coinbase’s demand for documents from Gensler predating his tenure as SEC Chair; Kevin Schwartz, an attorney representing Coinbase, argued that Gensler’s personal communications were relevant to the case, noting that the SEC had refused to discuss the full scope of documents Coinbase might possess.

In response, SEC senior trial attorney Jorge Tenreiro argued that Gensler’s pre-chair communications were irrelevant to the case, emphasizing that Gensler is neither a fact nor expert witness in the matter, and allowing such a subpoena could set a troubling precedent for future cases.

Coinbase Given Second Chance

Toward the end of the hearing, Judge Failla told Schwartz that she had “strong views” about the relevance of Gensler’s pre-chair statements and was inclined to side with the SEC’s perspective that the subpoena requests, adding that the request was inappropriate:

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, as articulated in the July 3rd response, to border on the fatuous.

These comments related to a July 3 response to the SEC’s objection, wherein Coinbase’s lawyers contended that it was legitimate to subpoena Gensler’s personal communications, citing his prominent role and public commentary on digital asset regulation. They argued that Gensler’s private discussions on regulatory matters were relevant to understanding the public’s and market participants’ perceptions of regulatory requirements.

After hearing arguments from both sides, Judge Faila reiterated her initial stance that Coinbase’s request seemed inappropriate, although she did offer Coinbase the opportunity to file a motion to compel the release of the communications, allowing for a more detailed briefing of arguments from both parties.