The Securities and Exchange Commission has settled a lawsuit against Coinbase over the crypto exchange's failure to preserve text messages. The resolution comes as a separate watchdog report reveals the agency itself lost nearly a year's worth of Chair Gary Gensler's text messages due to what investigators called 'avoidable errors.'
The Coinbase settlement
The SEC sued Coinbase last year, alleging the company failed to retain text messages as required by federal record-keeping rules. The case was part of a broader crackdown on Wall Street firms that used unapproved messaging apps for business communications. Coinbase did not admit or deny the allegations under the settlement, which was announced Tuesday. The terms of the deal were not disclosed.
The lawsuit was one of several enforcement actions the SEC has taken against financial firms for record-keeping lapses. In recent years, the agency has fined banks and brokerages hundreds of millions of dollars for similar violations. Coinbase, the largest U.S. crypto exchange, had argued that the SEC's rules were unclear for digital asset companies.
The watchdog's findings
While the SEC was pursuing Coinbase, its own record-keeping was under scrutiny. A report from the SEC's Office of the Inspector General, released last year, found that 'avoidable errors' led to the loss of nearly 12 months of Gensler's text messages. The watchdog said the agency failed to properly archive messages from the chair's personal device, a lapse that investigators described as preventable.
The report did not specify what the missing messages contained, but it raised questions about the SEC's ability to enforce the same rules it applies to others. The inspector general recommended that the SEC improve its policies for preserving electronic communications, including texts from senior officials.
The SEC has not publicly commented on whether it has fully implemented those recommendations. The agency's own record-keeping practices have drawn criticism from lawmakers and industry groups, who argue that the SEC holds companies to a standard it does not always meet itself.
What comes next
The Coinbase settlement closes one chapter, but the broader debate over crypto regulation continues. The SEC has not said whether it will take additional enforcement actions against other digital asset firms for missing messages. Meanwhile, the inspector general's office is expected to follow up on its recommendations later this year. Whether the SEC will face further scrutiny over its own record-keeping remains an open question.
