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FBI Launches Investigation into False SEC Announcement
- A day before the SEC approved 11 Spot Bitcoin ETFs, they hastily announced the approval early due to a ‘compromised’ account, sparking wild speculations and market turmoil.
- The FBI has joined the SEC in investigating the security breach where unauthorised access to the SEC’s social media account was gained through a phone.
- Members of the US House Financial Services Committee, particularly from the Republican Party, criticised the SEC’s handling of its recent security breach.
- They request a briefing on the incident and preventive measures by January 17, 2024.
The day prior to the approval of 11 Spot Bitcoin ETF in the United States by the Securities and Exchange Commission (SEC), the watchdog had made a bit of a slip-up – to say the least. The SEC prematurely posted the approval of said ETFs only to come out several minutes later saying their account had been ‘compromised’ and the post was ‘unauthorised.’
Wild speculations followed, as to what caused the early post, and just 24 hours later the approval was a done deal. Initial rumours suggested that the SEC’s ‘X’ account had been hacked, and many wondered how the SEC could have got access to their account back so quickly, when it takes others days, if not weeks.
Despite the eventual approval, the events and their effects from the previous day have not been forgotten. The Bitcoin price experienced a significant rally and crash due to the false news, resulting in the liquidation of hundreds of millions of dollars.
FBI Joins SEC To Investigate ‘Breach’
Reuters reported that the Federal Bureau of Investigation (FBI) is now also investigating the matter. Additionally, following its investigation, platform X announced that unauthorised access to the account was gained using a phone number associated with it. According to X, the SEC account also lacked two-factor authentication, which has become a standard security feature. Interestingly, in the past, the SEC has strongly emphasised the importance of social media accounts, asserting that their announcements can constitute investment advice.
A SEC spokesperson said the investigations are ongoing.
The SEC continues to investigate the matter and is coordinating with appropriate law enforcement entities, including the SEC’s Office of the Inspector General and the FBI.
US Securities and Exchange Commission
Actions Have Consequences – But for the SEC?
It did not take long for criticism of the SEC’s actions to emerge. US House Financial Services Committee members, consisting of several members of the Republican Party wrote a letter demanding an explanation from SEC Chair Gary Gensler.
This failure is unacceptable, and it is disturbing that your agency could not even meet the standard you require of private industry. Given yesterday’s tweet, we expect the SEC to hold itself to the same requirements that are imposed on companies throughout the country.
Financial Services Committee Republicans
The letter asserted the committee’s authority over the regulator and requested a response within a week.
The Committee has jurisdiction to oversee the activities of the SEC pursuant to Rule X of the Rules of the House of Representatives. To better understand how this breach occurred and how the SEC will ensure it cannot happen again, please provide a briefing to Committee staff no later than January 17, 2024.
Financial Services Committee Republicans
It remains to be seen what explanations, if any, the SEC and its chair will have to offer in the coming days.
Author
Aaron Feuerstein
Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.
