Judge slams FDIC’s ‘lack of good-faith’ in censoring crypto letters to banks

A United States federal judge has criticized the Federal Deposit Insurance Corporation (FDIC) for its redactions of crypto “pause” letters to banks in a Coinbase-backed Freedom of Information Act (FOIA) suit.

“The Court is concerned with what appears to be FDICs lack of good-faith effort in making nuanced redactions,” Washington, DC, district court judge Ana Reyes wrote in a Dec. 12 text order.

“Defendant cannot simply blanket redact everything that is not an article or preposition.”

Judge Reyes ordered the FDIC to “make more thoughtful redactions” and re-file letters by Jan. 3, adding the FDIC “should be prepared to defend each new redaction.”

The so-called “pause letters” shared earlier in December — which in some cases have entire pages censored — show the FDIC asked 23 financial institutions about their crypto-related activities.

In some of the letters, the FDIC told the firms to “pause all crypto asset-related activity” or otherwise “refrain from providing” or “expanding” seemingly crypto-related products and services.

“What is [the FDIC] working so hard to hide?” Coinbase legal chief Paul Grewal wrote in a Dec. 12 X post.

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Earlier this month, Grewal said the letters gave credence to a long-shared crypto industry rumor that the Biden administration was trying to cut the crypto industry off from financial services — dubbed “Operation Chokepoint 2.0.”

“[It] wasn’t just some crypto conspiracy theory,” Grewal wrote to X on Dec. 6. “[The FDIC] is still hiding behind way overbroad redactions.”

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