Court warns FDIC of sanctions over crypto documents
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A D.C. federal judge called the FDIC's interpretation of a court order to release all documents on a cryptocurrency policy matter "almost laughable" in a hearing transcript the plaintiffs released Thursday.
Why it matters: The judge warned the agency that if it can't reliably prove relevant documents were preserved, it will be in for sanctions from the court.
What they're saying: During the Jan. 22 hearing, Judge Ana Reyes was pointed in her very first question to the agency: "Can you please explain to me why you took the position you did with respect to the interpretation of the FOIA request, which was pretty obvious on its face not limited as you limited?"
Catch up quick: The case in question is History Associates vs. the FDIC, but the key party is the cryptocurrency exchange Coinbase, which retained History Associates to assist it in asking for copies of documents related to the FDIC ordering banks to pause various activities related to cryptocurrency.
- At first, the FDIC released a few letters it had sent to 24 institutions it supervised in December. Then it released more in early January.
- Wednesday, under new leadership, hundreds of additional pages were released, revealing new details not previously seen. "This review remains underway," acting FDIC Chairman Travis Hill noted in a statement.
Friction point: Whistleblowers have allegedly contacted the office of Sen. Cynthia Lummis (R.-Wyo.), claiming that relevant documents were destroyed between administrations.
- The hearing transcript revealed the FDIC never placed a legal hold on documents relevant to the FOIA lawsuit.
- According to the transcript, Judge Reyes, a 2022 Biden nominee, focused in on the question of whether or not communications between FDIC staff or other letters were destroyed.
- FDIC lawyer Andrew Dober replied, "I am not in a position to agree that the hold that you envision for a FOIA request is something that is required in FOIA."
- "Is there an exception to the Federal Rules of Civil Procedure that I'm unaware of?" Judge Reyes responded as they went back and forth over the point.
Between the lines: The FDIC attempted to delay the case for several weeks in light of the new leadership at the agency, but the judge made the opposite move, saying she intends to speed up the trial.
- She ordered the FDIC to prep someone to offer an oral deposition on behalf of the agency on everything related to relevant documents in the case and how they were or were not preserved.
- She warned the agency that if the witness was not well prepared or responsive, "life will become very, very unpleasant for the FDIC."
The FDIC declined to comment on the release of the transcript or its contents.
The big picture: In releasing the new set of documents Wednesday, acting chairman Hill characterized the repeated questions from the agency by saying that "these and other actions sent the message to banks that it would be extraordinarily difficult — if not impossible — to move forward. As a result, the vast majority of banks simply stopped trying."
What we're watching: The outcome of the FDIC deposition, if and when it takes place.
Editor's Note: This story has been corrected to clarify that the judge did not set a deadline for the FDIC deposition, and that it has not taken place yet.
