A recent report from the SEC's Office of Inspector General disclosed a serious loss of Chair Gary Gensler's text messages due to IT department errors. These messages cover key events in the cryptocurrency industry, including the FTX collapse and ETF litigation.
Details of Gensler's Text Loss
The report, released on Wednesday, indicated that in August 2023, the SEC's IT department mistakenly wiped Chair Gary Gensler's government phone after marking it as inactive. As a result, stored text messages and operating system logs were permanently lost. The investigation also revealed that the department failed to maintain important log data, leaving both the agency and its contractors unable to explain why Gensler's phone stopped connecting to the SEC's system.
Impact on SEC and Financial Entities
At the same time Gensler's messages were lost, the SEC was aggressively enforcing record-keeping violations among major investment banks like JPMorgan and Goldman Sachs for failing to preserve communications on unauthorized messaging apps. Coinbase Chief Legal Officer Paul Grewal pointed out the irony, noting that after years of lectures from the financial watchdog about data preservation, the agency failed to maintain critical communications during a pivotal period in crypto regulation.
SEC's Response Measures
In the wake of the incident, the SEC has disabled texting on most agency devices, notified the National Archives about the lost information, launched Capstone records training for senior officials, and upgraded backup systems.
The destruction of the SEC Chair's text messages during a critical period for the crypto industry raises serious questions about the agency's adherence to data preservation standards. This may affect its ability to respond to Freedom of Information Act requests.
