FDIC Faces Allegations of Withholding Crypto-Related Documents in Coinbase Lawsuit

The U.S. Federal Deposit Insurance Corporation (FDIC) is under scrutiny as new allegations suggest the agency may have withheld critical crypto-related documents in a lawsuit backed by Coinbase. The legal dispute stems from a Freedom of Information Act (FOIA) request seeking transparency on the FDIC’s so-called “pause letters,” which reportedly instructed banks to halt crypto-related operations.

In a status report filed on January 17, History Associates, a firm assisting Coinbase, accused the FDIC of “systematically thwarting FOIA requests.” The firm claims the agency failed to disclose at least 150 relevant documents, adding to concerns of intentional non-compliance. This revelation follows whistleblower allegations that the FDIC has a pattern of obstructing such requests.

Claims Shed New Light on “Pause Letters”

The controversy centers on 25 pause letters already released, which were sent to financial institutions as part of regulatory reviews. These letters are believed to be a key component of “Operation Chokepoint 2.0,” an alleged effort to sever crypto firms from traditional banking systems. Coinbase’s Chief Legal Officer, Paul Grewal, stated that the FDIC limited its search for letters to those identified in an Inspector General report. He claims additional letters might exist but were not included in the agency’s disclosures.

“When we asked them to fix their supposed reasonable interpretation and stop playing word games, they told us it would take at least a year,” Grewal remarked in a January 16 statement.

The FDIC, however, maintains that it has complied with the FOIA request and has conducted a thorough search for documents between March 2022 and May 2023. It argues that History Associates lacks a “reasonable basis” to demand additional documents outside this timeframe. The agency has also agreed to expedite a review of letters falling outside the original parameters as part of a separate FOIA request.

Possible Criminal Consequences

The case has drawn attention from policymakers, including Wyoming Senator Cynthia Lummis. In a letter dated January 16, Lummis warned the FDIC that destroying documents or obstructing the investigation could lead to criminal referrals to the Department of Justice.

Coinbase CEO Brian Armstrong initially filed the FOIA request to obtain unredacted copies of the pause letters after receiving heavily censored versions. The lawsuit escalated when Judge Ana Reyes ordered the FDIC to provide clearer documentation.