The story sounds more like an episode of House of Cards than a dry government report: the IT department of the U.S. Securities and Exchange Commission (SEC) “accidentally” deleted a full year of text messages from former chair Gary Gensler. And not just any year, but precisely the one when the regulator was running its toughest campaign against crypto companies.
How it happened
According to a report by the SEC’s Office of Inspector General, the issue arose from a “poorly understood and overly automated IT policy.” As a result, Gensler’s smartphone underwent a corporate wipe that erased both the text messages and system logs.
The loss was exacerbated by several factors:
- weak change management,
- lack of backups,
- ignoring system alerts,
- unresolved vendor software issues.
In other words, everything that could go wrong — went wrong.
What was lost
Messages from October 2022 through September 2023 were erased. Investigators managed to recover around 1,500 texts from other sources, and about 38% of them dealt with key SEC leadership matters.
Among them was correspondence about enforcement actions against crypto platforms and their founders. The report highlights one case: in May 2023, Gensler, his team, and the head of enforcement discussed timelines for filing lawsuits against specific crypto exchanges. Today, these conversations can no longer be fully restored: the texts are gone for good.
Double standards?
Ironically, during the same period the SEC fined major banks for using unauthorized messaging apps and demanded strict preservation of all communications. “Finance ultimately depends on trust. If market participants fail to preserve records, they undermine that trust,” Gensler said at the time. Yet it turned out that the regulator’s own records were undermining trust instead.
Following the incident, the SEC banned text messages on most devices, notified the National Archives, and began training executives on backup procedures. But what was lost cannot be recovered.
Steps the SEC took after the scandal:
- disabled text messaging on most corporate devices,
- notified the National Archives and Records Administration of the lost data,
- mandated training for senior officials on recordkeeping rules,
- began updating backup practices.
However, experts note that the lost messages cannot be restored.
Why it matters
The deleted messages may have contained crucial details about how decisions were made in major crypto cases. This means courts, Congress, and the public will never get the full picture.
The crypto community’s reaction was predictable: ranging from outrage to sarcasm. Many pointed out that this was the exact period of the market’s biggest events — the FTX collapse, Grayscale’s bitcoin ETF lawsuit, and new investigations into exchanges.
Crypto community reaction
In the crypto industry, the news sparked an outburst of emotions. The loss of communications during such pivotal events — the FTX collapse, ETF lawsuits, new exchange probes — seemed far too “convenient.”
Nate Geraci, president of NovaDius Wealth Management, stated: “Think about everything that was happening in the market at that time. From the FTX collapse to the Grayscale lawsuit. The loss of exactly this correspondence is a coincidence that makes you wonder.”
Many in the industry believe the incident could undermine the legitimacy of SEC investigations and may serve as an argument in future lawsuits against the agency.
⚖️ Bottom line: the story of Gensler’s “lost” messages is not just a technical mishap. It signals weak internal procedures at one of the world’s most powerful financial regulators. And at the same time, it gives the crypto community a reason to ask an uncomfortable question: if the SEC cannot…
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