On Tuesday afternoon, the official X (formerly Twitter) account of the Securities and Exchange Commission (SEC) posted a much-anticipated tweet: “Today the SEC grants approval for Bitcoin ETFs for listing on all registered national securities exchanges.” However, it was a false announcement as the SEC X account was hacked.
SEC Failed to Secure Its X Account
According to the Safety team at X, the compromise was “due to an unidentified individual obtaining control over a phone number associated with the [SEC] account through a third party.”
The “preliminary investigation” of X further found that the SEC account “did not have two-factor authentication enabled at the time the account was compromised.” This raised massive security concerns on the part of the regulator.
We can confirm that the account @SECGov was compromised and we have completed a preliminary investigation. Based on our investigation, the compromise was not due to any breach of X’s systems, but rather due to an unidentified individual obtaining control over a phone number…
— Safety (@Safety) January 10, 2024
Prompt Action Failed in Damage Control
After the false tweet, the SEC's Chief, Gary Gensler, quickly announced from his personal X account that the official X account of the regulator was compromised, and the fake tweet was deleted in about 30 minutes. However, the damage was already done.
The @SECGov twitter account was compromised, and an unauthorized tweet was posted. The SEC has not approved the listing and trading of spot bitcoin exchange-traded products.
— Gary Gensler (@GaryGensler) January 9, 2024
Some theories of an “inside job” and “fat finger” mistake were floated around. However, X’s confirmation of a compromised phone number debunked those theories.
The false announcement was made a day before the deadline for the SEC’s decision on the spot Bitcoin ETF application submitted by Ark and 21Shares. Although the regulator has been delaying or rejecting Bitcoin ETF applications since 2013, this time, the industry is anticipating approval. Even two top Bloomberg analysts have put 90 percent odds on the approval before the Wednesday deadline.
Crypto Market Reacts Quickly
The already bullish demand for Bitcoin momentarily jumped 4 percent in response to a false tweet from the compromised X account of the SEC. However, the prices swiftly corrected once the inaccuracy of the announcement came to light. There are some speculations that the hackers might have benefited from the Bitcoin price swings caused by the fake announcement.
Allegations of “Market Manipulation”
Earlier, Gensler was vocal about cybersecurity for financial services firms. He even encouraged investors to secure their financial accounts. However, the lack of 2FA for the regulator’s X account raised basic security questions.
This is a reminder to secure your financial accounts as well as protect against identity theft and fraud.Remember to:????Use strong passphrases or passwords????Set up multifactor authentication????Keep account alerts turned on#CybersecurityAwarenessMonthhttps://t.co/qitGkujLxD
— Gary Gensler (@GaryGensler) October 24, 2023
The regulator is now facing backlash from a section of lawmakers and other pro-crypto lawyers and influencers. Most are pointing at “market manipulation” of Bitcoin prices caused by the fake tweet. Senator Bill Hagerty has demanded an answer from the SEC on the “market-moving mistake”.
Another state legislator questioned the “horrible rulemaking” by the SEC.
Chair @GaryGensler,Does this mean we can blame more of the @secgov’s horrible rulemaking and so-called regulation by enforcement on a “compromised account”? #askingforafriendSincerely, Chairman of the House Financial Services Oversight and Investigations Subcommittee pic.twitter.com/THqZ2PlVle
— Rep. Bill Huizenga (@RepHuizenga) January 9, 2024
Crypto industry entrepreneurs and influencers additionally criticized the SEC, which is actively engaged in legal battles with multiple crypto companies for alleged securities law violations, for manipulating the markets.
Just like the SEC would demand accountability from a public company if they made such a colossal market-moving mistake, Congress needs answers on what just happened. This is unacceptable. https://t.co/tWtLqHtqpu
— Senator Bill Hagerty (@SenatorHagerty) January 9, 2024
Meanwhile, murmurs from the securities lawyers indicate that the SEC needs to “investigate itself” for possible market manipulation.
BREAKING: Securities lawyers tell @FoxBusiness the @SECGov will have to investigate itself for market manipulation after moving the price of $BTC up and down following the hacked tweet that it had approved the first spot BTC ETF and then saying it was fake. That said, for the SEC…
— Charles Gasparino (@CGasparino) January 9, 2024
"The SEC will work with law enforcement and our partners across government to investigate the matter and determine appropriate next steps relating to both the unauthorized access and any related misconduct," an SEC spokesperson told the media.
This article was written by Arnab Shome at www.financemagnates.com.
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