- The FDIC will pay $188,440 in legal fees and overhaul its FOIA policies to settle a lawsuit over undisclosed “pause letters” sent to banks.
- A federal court ruled the FDIC violated federal disclosure law by withholding dozens of letters instructing banks to halt crypto-related activities.
- The settlement concludes a multi-year legal battle initiated by Coinbase, which exposed alleged “Operation Choke Point 2.0” tactics by regulators.
- The agency pledged it will no longer categorically withhold all bank supervisory documents and will “liberally construe” future FOIA requests.
The Federal Deposit Insurance Corporation (FDIC) agreed on Friday to pay $188,440 in legal fees and reform its transparency practices, settling a federal lawsuit that exposed its secret campaign to pressure banks against cryptocurrency activities. This settlement, detailed in a joint status report, concludes a contentious Freedom of Information Act (FOIA) battle initiated by Coinbase. Consequently, the regulator will now revise policies it previously used to withhold documents categorically.
A federal judge officially ruled in November that the FDIC violated FOIA by initially refusing to release the so-called “pause letters.” These letters, first revealed in an October 2023 OIG report, asked banks to halt or limit planned crypto services. The court found the agency redacted information not legitimately exempt from public disclosure.
The legal ordeal required four court orders and six document productions before all records were released. Coinbase Chief Legal Officer Paul Grewal celebrated the outcome, posting on X that the litigation uncovered “indisputable proof” of coordinated debanking efforts. He referenced allegations of “Operation Choke Point 2.0,” a term comparing the actions to a past program targeting gun dealers.
Compliance expert Joe Ciccolo, founder of BitAML, criticized the FDIC’s lack of transparency. “Shame on the FDIC—they are supposed to exemplify transparency given their mandate to protect consumers and insure the public’s money,” he told Decrypt. He argued oversight should be risk-based, not conducted through cryptic pressure.
As part of the settlement, the FDIC committed to significant policy changes. Its staff will now receive training to “liberally construe” FOIA requests instead of applying blanket exemptions. Once the agency remits the legal fee payment, the parties will formally dismiss the case.
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