FDIC Settles FOIA Case and Pays $188K to Release Crypto Bank “Pause Letters”

Highlights:

• FDIC has settled the FOIA case and agreed to release crypto pause letters after a prolonged court dispute.
• A federal court ruled the FDIC wrongly withheld records without reviewing them individually.
• The disclosed letters renewed scrutiny over how banks were urged to limit crypto services.

The Federal Deposit Insurance Corporation reached a settlement that ends its fight to keep crypto-related “pause letters” out of public view. The agreement followed months of litigation over how the agency handled a public records request.

In a joint status report filed in federal court in Washington, D.C., the Federal Deposit Insurance Corporation agreed to pay $188,440 in legal fees. History Associates Incorporated will receive the payment after submitting the request at Coinbase’s direction. The agency also agreed to release the disputed records and revise certain disclosure practices.

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The case commenced when the FDIC refused a records request filed in November 2023. The agency argued that the records fell under FOIA Exemption 8 and were subject to withholding. It claimed that the records were supervisory and therefore warranted the denial. Subsequent filings, however, indicated that the FDIC depended on record type and not document-level review. That strategy attracted attention when the case was taken to federal court.

The letters were made public following an internal watchdog report. In October 2023, the FDIC Office of Inspector General indicated that the agency wrote letters requesting that the banks stop or refrain from expanding crypto-related services. Following that revelation, Coinbase took a step to secure the correspondence. In June 2024, History Associates subsequently filed suit seeking the release of the materials after the FDIC still refused to provide them. The case claimed that the agency had made flawed blanket exemptions.

FDIC Settles FOIA Case After Court Fight Over Disclosure Practices

A federal court ruled in November that the FDIC violated the Freedom of Information Act. The court said the agency improperly withheld the pause letters as a group. It also found that some redactions did not meet legal standards. The ruling rejected the idea that supervisory records automatically qualify for secrecy. The decision required the agency to reassess how it applies FOIA exemptions.

U.S. District Judge Ana Reyes later criticized the FDIC’s redaction process. She warned that the agency failed to show a good-faith effort during earlier reviews. The court ordered the FDIC to apply more careful and targeted redactions. Over the course of the case, the agency needed four court orders to complete its response. It also produced documents across six separate disclosures.

The case centers on the communication of regulators to banks regarding crypto activity. The report by the inspector general had already indicated that FDIC officials requested banks to suspend some services. The case then proceeded to the court to determine whether such communications were entitled to full protection. The judge pointed out that FOIA specifically mandates that each section that would be withheld be given specific reasons. That ruling informed the case result and the ultimate settlement.

Banking Pressure Allegations Return as Disclosure Rules and Training Shift

The publication of the letters revived discussion on what is called Operation Choke Point 2.0. Critics use the term to describe purported attempts by regulatory authorities to limit access of crypto firms to banking services.

In response to the settlement, Coinbase Chief Legal Officer Paul Grewal remarked that the lawsuit revealed dozens of pause letters to financial institutions. He termed the records as evidence of coordinated regulatory action. Coinbase assisted in the request for the records once it was verified that the letters were there. History Associates managed the request and legal filings.

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The FDIC agreed to revise its FOIA training materials as part of the settlement. The agency will teach employees to be more liberal in interpreting record requests. It further noted that it does not maintain a blanket policy of withholding supervisory documents under Exemption 8. The parties indicated that they would file a formal dismissal after payment is submitted by the agency.