The FDIC has agreed to pay $188,440 in legal fees and drop its fight to withhold crypto-related “pause letters,” settling a FOIA lawsuit tied to alleged Operation Choke Point 2.0 debanking tactics and closing a case that forced the regulator to release records showing how banks were allegedly pressed to halt or limit crypto activity.
In a joint status report filed Friday in federal court in Washington, D.C., the Federal Deposit Insurance Corporation agreed to pay the full attorney’s fees from History Associates Incorporated, the research firm that filed the records request at Coinbase’s direction, and revise certain FOIA practices.
The FDIC’s appeal-denial letter had acknowledged its “decision to withhold was based upon a determination that the type of records being requested would be exempt, rather than making exemption determinations on a document-by-document basis,” according to the status report.
The records became public after the FDIC’s Office of Inspector General revealed their existence in an October 2023 report, which criticized the agency for sending letters to banks “asking them to pause, or not expand, planned or ongoing crypto-related activities.”
The settlement follows a November court ruling that officially found the FDIC “violated FOIA” by initially categorically withholding the letters and “redacting information in the pause letters that is not subject to Exemption 8 or would not impair any interest protected by Exemption 8.”
Joe Ciccolo, founder and president of BitAML, told Decrypt the ruling shows crypto oversight in the previous administration was shaped as much by “political and reputational considerations” as by traditional safety-and-soundness analysis.
“Shame on the FDIC—they are supposed to exemplify transparency given their mandate to protect consumers and insure the public’s money,” Ciccolo said.
“Operation Choke Point 2.0” refers to alleged coordinated efforts by U.S. bank regulators, including the FDIC, Federal Reserve, and OCC, to restrict crypto firms’ banking access, borrowing its name from an Obama-era program that pressured banks to cut off gun dealers and payday lenders.
When Coinbase sought the letters in November 2023, the FDIC denied the request as exempt “by their very nature,” later saying its decision to withhold was based on record type rather than a “document-by-document” exemption review.
After History Associates sued in June 2024, U.S. District Judge Ana Reyes ordered the FDIC to produce the letters and later warned of a “lack of good-faith effort” in its redactions, directing the agency to make more thoughtful ones.
It took four court orders and six productions for the FDIC to produce all responsive documents.
“The years of litigation were worth it,” Coinbase CLO Paul Grewal posted on X following the settlement. “We successfully uncovered dozens of crypto ‘pause letters’—indisputable proof of OCP2.0 and the coordinated effort to sideline the industry.”
Under the settlement, the FDIC committed to policy changes, including adding language to training materials instructing staff to “liberally construe” FOIA requests and declaring it does not maintain a blanket policy of categorically withholding all bank supervisory documents under FOIA Exemption 8.
Ciccolo said oversight should be “transparent, risk-based, and grounded in clear supervisory standards, not informal pressure conveyed through cryptic ‘pause letters,’” warning that behind-the-scenes regulatory actions erode trust in the supervisory framework.
The parties will file a formal dismissal once the FDIC remits payment. The regulator did not immediately return Decrypt’s request for comment.