On January 6, 2025, Coinbase’s Chief Legal Officer Paul Grewal spoke out on a platform to discuss the ongoing legal battle with the Federal Deposit Insurance Corporation (FDIC), which had sent “pause letters” to banks advising them to halt services for cryptocurrency clients. As Grewal stated, the FDIC misused FOIA exemption 8 in an effort to conceal information that was compelled by a court order.
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Coinbase filed a lawsuit against the Federal Deposit Insurance Corporation (FDIC), demanding they comply with the Freedom of Information Act. At first, their request was turned down by the FDIC. However, as stated by Grewal, the FDIC did not deliver all the court-ordered documents on time and only released more documents when faced with further legal action. Furthermore, the FDIC overused FOIA exemption 8 to heavily blackout the provided documents (often referred to as “pause letters” sent to financial institutions), lacking a legitimate reason for doing so under the law.
Under the Freedom of Information Act, Exemption 8 shields details found within or linked to inspection reports generated by, commissioned by, or meant for agencies that oversee and monitor financial institutions.
Why did the FDIC redact disclose documents?
A justification given for withholding specific information from the shared documents was that the disclosure of such details might lead to “potentially predictable harm” for the recipients of these correspondence, which are the banks and the Federal Deposit Insurance Corporation (FDIC). It is claimed that if the names of the institutions, their particular activities, and other relevant details were made public, it could potentially strain the relationships between these banks and the FDIC. Remarkably, the letters weren’t classified as confidential until September 2022, when the FDIC started adding secrecy notices to the documents.
In essence: The FDIC has been less than truthful. I don’t make this claim lightly. However, it appears that the redactions weren’t intended to safeguard confidential supervisory information. Instead, they seem to conceal evidence suggesting attempts to halt Bitcoin transactions, the advancement of blockchain technology, and possibly a bank account related to…
— paulgrewal.eth (@iampaulgrewal) January 6, 2025
On January 4, some previously hidden information was disclosed. Grewal asserts that this new data doesn’t damage the recipients of the halt letters and alleges that the FDIC fabricated the reason for the delay to conceal an ongoing Operation Choke Point 2.0. This term refers to a series of attempts by the FDIC, Federal Reserve, and other entities to prevent services for clients involved in cryptocurrency transactions, religious organizations, clients linked to African countries, and other law-abiding customer groups.
John E. Deaton, a senator and ex-prosecutor, voiced his approval of the initiatives aimed at thwarting Operation Choke Point 2.0 and expressed his readiness to spearhead an inquiry into the implicated officials, without charge.
As a crypto investor with a background in law, having served as a prosecutor and Special Assistant United States Attorney, I am deeply passionate about contributing to the federal investigation into ChokePoint 2.0. I am willing to take on this role without any compensation, for the American people deserve the truth more than anyone, myself included.
— John E Deaton (@JohnEDeaton1) January 4, 2025
In a recent post, Deaton underscores the significance of the Choke Point 2.0 in the ongoing legal battle with Ripple. He cautions that the potential for “unappointed officials… capriciously denying access to vital financial infrastructure” could have far-reaching implications beyond the cryptocurrency field.
The “pause letters” recap
The FDIC’s letters to financial institutions suggested halting banking services for customers involved in cryptocurrency transactions. These letters mentioned that such services might not be offered until guidance from the regulatory body is received, although it remains unclear if such advice has ever been given. Typically, clients were left without clear justifications regarding the discontinuation of these services. In many instances, banks acknowledged blocking accounts due to “unusual account activity” or similar reasons.
25 letters, revealed during the period spanning from 2022 to 2023, were exchanged. The activities within financial institutions that were strongly advised to halt temporarily encompassed:
1. Engaging in specific practices (as detailed below).
2. These temporary halts could potentially last for an unspecified duration.
- Bitcoin-backed lending operations
- NFTs and cryptocurrency storage by the banks
- Onboarding of the decentralized “ecosystems”
- Products that allow clients to buy or sell cryptocurrencies
- Private and public blockchain settlement networks
- Issuance of permissioned stablecoins
- Stablecoins depositories
- Issuing debit cards that support Bitcoin cash back
Other known cases include the blocking accounts of cryptocurrency hedge funds.
In a 2022 release from the FDIC, there’s an internal memo stating that any FDIC-supervised banks planning to introduce cryptocurrency-related services should first notify their regional FDIC director and supply all essential information needed for evaluation.
Is Operation Choke Point 2.0 real?
Multiple instances exist where banks have chosen to discontinue services for clients involved in cryptocurrency. While this doesn’t necessarily prove the operation is ongoing, letters from the FDIC serve as supporting evidence. Although these letters do not explicitly demand the closure of client accounts, they create difficulties through prolonged account freezes, causing unease among U.S. entrepreneurs in the crypto industry. For those who question whether Operation Choke Point 2.0 truly exists, it can be stated that the FDIC’s suggestions to indefinitely close bank accounts for law-abiding companies are indeed a reality.
Activists discussing Operation Choke Point 2.0 allege that the Federal Deposit Insurance Corporation (FDIC) has secretly initiated a misleading information strategy aimed at discrediting them.
Following our post’s explosive response, we’ve uncovered reliable intel suggesting that the Federal Deposit Insurance Corporation (FDICgov) may be covertly spreading false information against several PR opponents such as @iampaulgrewal, @CampbellJAustin, @nic__carter, @CaitlinLong_, and @vronirwin.
The person in question…
— FDIC Exposed (@FDIC_Exposed) January 7, 2025
In the ongoing conflict, fresh details will clarify the real intention behind the accused illegal anti-cryptocurrency measures, helping us determine whether the Federal Deposit Insurance Corporation’s actions were more about prudence or open aggression.
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2025-01-08 18:42