NY Judge rejects Coinbase's efforts to subpoena SEC Chair Gary Gensler, says she is surprised 'not in a good way'

Coinbase's arguments did not persuade U.S. District Judge Katherine Polk Failla of New York to subpoena U.S. Securities and Exchange Commission Chair Gary Gensler during a hearing on Thursday to air out differences. 

Coinbase served Gensler with a subpoena in June and asked the chair to produce documents concerning certain communications that the exchange said were relevant to the case. That would include documents about crypto from 2017 to the present, covering the four years before Gensler was sworn in in 2021. Meanwhile, the SEC filed a protective order, saying the subpoena should have been directed at the agency, not to Gensler, calling it an "improper intrusion into a public official's private life."

Last week, Coinbase's lawyers argued in a July 3 letter to Judge Failla that Gensler's personal emails on crypto were "an appropriate source of discovery."

"I was sort of surprised, and not in a good way, by the July 3 response," Judge Failla said during a pre-trial motion conference on Thursday. Judge Failla said she had specific concerns, including Coinbase's argument about Gensler's private communications. 

Ultimately, Judge Failla said she "was just not moved by basically any of the arguments." She ultimately decided it would be best for Coinbase to file a motion to compel, though she did not seem persuaded by the exchange's push for a subpoena. 

"There might be some amazing argument that's being held in reserve by defense counsel, but at the moment, I didn't see it in the submission that was given to me," she added. "And more than that, I actually reacted to this response by thinking that defense counsel was spending an amount, perhaps not an inconsiderable amount of the resevoir of credibility that they have built up with me throughout this litigation." 

The two parties have been embroiled in a lawsuit since last year when the agency sued Coinbase for operating its platform without registering. Coinbase had moved to dismiss that lawsuit but was shut down by Judge Failla in March. The judge said that the SEC had "sufficiently pleaded" that Coinbase operated as an exchange, broker, and clearing agency and engaged in the unregistered sale of securities through its staking program. However, she did dismiss a claim regarding Coinbase’s Wallet application. 

Kevin Schwartz, a lawyer representing Coinbase, said the company had tried to work with the SEC but was facing challenges.

"We're unable to get information from the SEC, we've been unable to even have a constructive discussion about ascertaining what information exists and to get from Mr. Gensler in his personal capacity on these same issues," Schwartz said on Thursday. 

The judge said she was troubled by their discussions. 

"It would be great if the parties could work together more constructively and bother me less. I don't sense that that's happening," she added.

Meanwhile, the SEC's lawyer, Jorge Tenreiro, called the subpoena "entirely improper" during Thursday's hearing. 

In a June letter, the SEC said the subpoena was too burdensome.

"... it is incalculably intrusive and harassing to search a citizen’s communications with friends, colleagues, or even the press in his spare time," the SEC said.