Gary Gensler's deleted text messages cost the SEC $150,000 in Coinbase case

Summary

The SEC will pay Coinbase $150,000 for the loss of Gary Gensler's cryptocurrency-related text messages. The SEC's Office of the Inspector General blamed the loss on avoidable IT failures and a restoration of factory settings. The settlement agreement requires the regulator to revise its official communication retention policy.

A July 22 column by Coinbase Chief Legal Officer Paul Greval disclosed the agreement, ending the exchange's Freedom of Information Act lawsuit against the agency. According to Greval, under the settlement, the SEC will pay Coinbase $150,000 and revise its record-retention policy.

Coinbase filed the lawsuit to obtain internal SEC records on how senior officials handled cryptocurrency regulation and enforcement. The exchange also sued the Federal Deposit Insurance Corporation in 2024, seeking documents that it believed could show that U.S. regulators coordinated restrictions on cryptocurrency companies 'access to financial services.

The SEC records at issue include information exchanges between Gensler and other agency officials. Greval wrote that the SEC blamed the loss on a process that "automatically wipes" certain data, although Coinbase had previously requested access to communication records related to encryption policy decisions.

SEC error results in months of loss of records

A September 2025 review by the SEC's Office of the Inspector General found avoidable errors that led to the loss of Gensler's information. The missing text messages cover the period from October 18, 2022 to September 6, 2023, when the SEC is taking multiple enforcement actions against digital assets. According to the Inspector General's report, SEC technicians restored the factory settings of the iPhone issued by Gensler's institution on September 6, 2023, because it could no longer access SEC applications. The reset permanently deleted mobile phone data, and staff had not yet completed available backups. Although the Information Technology Office backed up the device later that afternoon, the inspector general found that the information could no longer be restored. The report concluded that losses could have been avoided if they were backed up in time and measures were taken to improve record-keeping as early as possible.

According to the review report, SEC technicians announced a plan in October 2022 to ban the use of text messaging on institutional devices. However, the office delayed implementation while developing the exemption process and preparing for a possible government shutdown, resulting in Gensler's phone not being backed up again before being reset. The inspector general reported that the SEC finally removed the SMS application from institutional devices in March 2024. A separate notice filed with the National Archives and Records Administration also disclosed that the agency later encountered problems locating and retrieving information from the SEC-issued mobile phones of five other senior officials.

After the inspector general's findings were released, Greval accused former SEC leadership of violating its public obligations by losing material sought by Coinbase. In a September 2025 post, the chief legal officer wrote that the agency destroyed "documents they should have kept and submitted." "Even though we required access to 'all communications' within the SEC years ago related to crypto regulation and enforcement decisions, the SEC under Gensler did so."

Coinbase's disclosure battle predates the settlement

Coinbase's pursuit of SEC communications also emerged in the agency's previous enforcement litigation against the exchange. In July 2024, Coinbase asked a federal court in New York to force the regulator to file documents related to internal discussions during Gensler's term starting in 2021. After objections from the SEC and U.S. District Judge Katherine Polk Fayla, Coinbase narrowed the scope of an earlier request, which had covered Gensler's communications before, after and during his tenure as chairman. Its July 23 motion focused on his record while leading the agency.

Subpoena No. 23 requests documents related to Gensler's public speech on digital asset regulation. Greval argued at the time that the materials were "directly related to the claims the SEC is now making." Under Coinbase's motion, the SEC refused to conduct a search outside of its law enforcement investigative documents, citing relevance and burdens involved. The exchange also claimed that the regulator would not conduct searches in custodians 'email accounts or establish systems to provide relevant documents or list withheld records.

The requests came as Coinbase defended itself when the SEC accused it of operating unregistered stock exchanges, brokers and clearing houses. Under the Trump administration, the committee dismissed the enforcement case in February 2025 without requiring Coinbase to pay fines or change its business practices.

Coinbase has since reportedly supported federal cryptocurrency legislation, including the stablecoin framework approved by Congress, while CEO Brian Armstrong and Greval have urged lawmakers to push the CLARITY Act. Under Gensler's leadership, the SEC has also begun to develop policies for tokenized securities and other digital asset products.

The latest settlement resolves Coinbase's Freedom of Information Act dispute and requires the regulator to change the way it retains official communications. Grewal's description tied the $150,000 payment with these record-keeping reforms, linking the compensation directly to information the inspector general determined was lost due to agency preventable failure.