FDIC Pays $188k, Pledges Policy Shift In Coinbase FOIA Crypto Case

The FDIC will pay $188,440 and revise its disclosure rules after a Coinbase FOIA lawsuit exposed “pause letters” telling banks to curb or halt crypto services.

The Federal Deposit Insurance Corporation agreed to pay $188,440 in legal fees and revise its public disclosure policy to settle a Freedom of Information Act lawsuit filed by Coinbase, according to court documents.

The settlement resolves a multi-year legal dispute over the FDIC’s refusal to disclose documents that allegedly directed banks to halt or restrict cryptocurrency services, according to Decrypt.

The case centered on correspondence the FDIC sent to banks, characterized as “cease and seek letters,” which requested financial institutions refrain from offering new cryptocurrency-related services or expanding existing digital asset operations.

Coinbase filed the FOIA request seeking disclosure of these documents after confirming their existence. The FDIC declined to release the materials, prompting the legal action.

The court ruled the FDIC’s response violated the Freedom of Information Act by withholding all documents collectively under a blanket claim that “such documents are not subject to disclosure” without conducting individual document reviews, according to the ruling.

The settlement resulted in the disclosure of dozens of cease and desist letters from the FDIC ordering banks to cease cryptocurrency-related activities, according to legal experts familiar with the case.

Paul Grewal, Chief Legal Officer at Coinbase, stated in a press release following the settlement that the litigation confirmed documents directing banks to avoid cryptocurrency operations existed.

The FDIC is an independent government agency that operates under federal authority to insure bank deposits and supervise financial institutions in the United States.