Two U.S. Senators have written to Securities and Exchange Commission (SEC) chair Gary Gensler demanding an explanation for Tuesday's fake tweet from the SEC's Twitter account, which falsely claimed that multiple spot Bitcoin ETFs had been approved.
In a letter addressed to Gensler, Senators JD Vance (R-OH) and Thom Tillis (R-N.C.) wrote to "express concern and request clarity" regarding the SEC's social media communications, adding that the incident raises "serious concerns" over the regulator's cybersecurity procedures. The pair also demanded that the SEC explain its "plans to investigate the error."
As the crypto world waited with bated breath to see if the SEC would approve one or more spot Bitcoin ETFs Tuesday, the regulator's Twitter account appeared to confirm that multiple ETFs had been given the green light. Minutes later, SEC chair Gensler took to Twitter to announce that the regulator's account had been "compromised," and that an "unauthorized tweet was posted." He clarified that, "The SEC has not approved the listing and trading of spot bitcoin exchange-traded products."
Vance and Tillis wrote that the fake SEC announcement and subsequent retraction "led to extreme volatility in the price of Bitcoin," with investors "incredibly confused" by the regulator's communications regarding "the long-awaited and consequential decision." The price of Bitcoin plunged from a two-year high of $47,680 to nearly $45,500 as news of the fake announcement spread.
The Senators demanded that the SEC explain how the fake announcement came to be made, whether it was made by an SEC employee or an "outside entity," and how the regulator plans to "rectify any financial losses borne by investors as a result of the errant announcement."
Some of those questions appear to have been answered already by the SEC and Twitter's own preliminary investigations. A Twitter Safety post-mortem of the incident stated that the incident was "not due to any breach of X’s systems but rather due to an unidentified individual obtaining control over a phone number associated with the @SECGov account through a third party."
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
Twitter's Safety team also highlighted the fact that the SEC's account did not have two-factor authentication enabled at the time of the hack—contradicting chair Gensler's own recommendations against identity theft and fraud.
The SEC itself noted that its account had been "compromised" in a tweet following the incident, and reiterated Gensler's statement that the regulator has not approved the listing and trading of any spot Bitcoin ETFs. In a statement to Decrypt, it noted that the person/persons responsible for the unauthorised access had been terminated.
"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," a statement from the regulator continued.
In their letter, Vance and Tillis asked that if the tweet were found to be the result of a cybersecurity attack, the SEC provide Congress with a report on the breach within four business days.
The SEC's social media blunder comes at a time of heightened anticipation among the crypto fraternity, with a possible window for the simultaneous approval of multiple spot Bitcoin ETFs closing Wednesday.
To date, the regulator has rejected all applications for a spot Bitcoin ETF, though the entry of asset manager BlackRock into the race in June 2023, and a court victory against the SEC by ETF hopeful Grayscale later that year, have prompted renewed optimism that an approval could be imminent. This week, analysts for Bloomberg Intelligence raised the odds of a spot Bitcoin ETF being approved in January to 95%.