A raft of US senators have demanded answers from the Securities and Exchange Commission (SEC) after a security incident led to false and market-moving information being published by the financial regulator.
At 4:11 pm ET on January 9, a post was published to the SEC’s X account announcing the approval of spot bitcoin ETFs, a type of financial product that would allow people to invest in the crypto asset through a regular brokerage. By 4:26 pm, SEC chair Gary Gensler had issued a retraction and said the agency’s account had been “compromised,” and that an “unauthorized tweet was posted.” The damage had alre ady been done.
There has been speculation by media outlets, including Fox Business, that the SEC might be tasked with investigating itself over market manipulation infractions, as a regulator responsible for protecting US investors from precisely that threat. More likely, says a former SEC attorney who asked not to be named, given that bitcoin is classified as a commodity in the US, such an investigation would fall to the US Commodities and Futures Trading Commission (CFTC).
But even then, the issue of jurisdiction aside, unanswered questions remain about the practicability of any potential investigation, says Charley Cooper, former chief operating officer at the CFTC. “The idea of the commodities regulator investigating the securities regulator is unprecedented,” he says. “There is no manual for this.”
In a statement, the CFTC said it has “enforcement authority” with respect to any alleged manipulation of bitcoin, but declined to confirm whether it would investigate in this instance.
In the minutes after the fake post was published, the price of bitcoin jumped around 2.5 percent, but has since fallen to below 2.5 percent of its original price. In all, the incident led to a $40 billion swing in the combined value of bitcoin in circulation.
X said an “unidentified individual” had used a phone number tied to the SEC’s account to seize control. The account “did not have two-factor authentication enabled” at the time of the hack, X said.
In a cosigned letter, Republican senators J. D. Vance and Thom Tillis demanded the SEC answer for the “widespread confusion” and damage to investors it had caused. The incident is “antithetical to the Commission’s tripart mission to protect investors, maintain a fair, orderly and efficient market, and facilitate capital formation,” the pair wrote. Senators Bill Hagerty and Cynthia Lummis, both Republicans, added their voices to the chorus with separate posts on X.
In their letter, Vance and Tillis set a deadline of January 23 for the SEC to elucidate its plans to investigate what happened, among other things.
In a statement, the SEC said it 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,” but provided no further specifics.