Coinbase Seeks Sanctions After SEC Texts Go Missing

Coinbase has taken its clash with the U.S. Securities and Exchange Commission to another level by asking for Court Sanctions after revelations that nearly a year of SEC Texts from Gary Gensler were deleted. These messages span from October 2022 to September 2023. There is a stretch that includes the collapse of FTX. It has multiple enforcement actions against Coinbase itself. For Coinbase, the missing records are evidence. As per them, that could have shaped the company’s defense in the ongoing Crypto Lawsuit. By filing for Coinbase Sanctions, the company is putting the spotlight on the SEC’s own compliance failures.

Deleted Records Raise Questions About SEC Accountability

The Inspector General’s report makes it clear this was not a random glitch. The deletion happened when Gensler’s government-issued phone was reset under an SEC IT policy that wipes devices after 45 days offline. The problem is that these texts contained mission-related conversations, including discussions about timing enforcement actions against trading platforms. The report found that 38% of the recovered messages were tied directly to agency business. A regulator with a reputation for tough oversight losing records at such a critical time naturally sparks questions about accountability and fairness.

Double Standard in Coinbase Sanctions Argument

Since 2021, the SEC has gone after more than 100 firms for failing to keep proper records. Those cases brought in over $2 billion in penalties. These cases all came down to the same principle: preserve every business-related communication, no matter the channel. Coinbase’s legal team now argues that if the SEC demands this level of discipline from private firms, then Court Sanctions are appropriate when the agency itself fails to meet the same obligation.

Wider Record Loss Extends Beyond Gary Gensler’s Texts

The issue is bigger than Gary Gensler’s texts. The Inspector General found that more than 20 other senior SEC officials may have already lost records, with nearly 40 additional officials at risk due to weak backup practices. That scale of potential record loss means Coinbase’s motion could open the door for others in the crypto industry, or even outside it, to challenge the SEC’s credibility in enforcement proceedings. Courts have in the past issued harsh sanctions, including dismissals and adverse instructions, when relevant evidence was destroyed. Clearly, Coinbase is leaning on that precedent to strengthen its motion.

Potential Ripple Effects of Coinbase Sanctions on Enforcement

If sanctions are granted, the impact would ripple through ongoing enforcement. It might also force the agency to rethink how it approaches record preservation for its own leadership. That’s why it’s also about whether the SEC can maintain moral authority after demanding compliance from everyone else. Coinbase Sanctions would mark a turning point in how regulated firms deal with the agency.

Crypto May See SEC Credibility Weakened For Missing Records

 The missing SEC Texts provide Coinbase with ammunition to argue that regulators cannot enforce rules they fail to follow themselves. Gary Gensler, who once positioned himself as a tough enforcer, is now at the center of a transparency scandal that weakens the SEC’s hand. Whether or not the court imposes sanctions, the credibility hit is already significant, and it will weigh on how future regulatory cases are viewed.