SEC’s Gensler Faces Scrutiny Over Missing Texts Amid FTX Collapse Timing

TLDR

• The SEC reported that nearly a year’s worth of text messages from Gary Gensler’s phone were permanently lost.
• The lost messages cover a critical period between October 2022 and September 2023, including key crypto discussions.
• The SEC blames weak technology practices for the data loss, including ignored alerts and poor backup procedures.
• A significant portion of the recovered messages were mission-related, with some covering possible SEC actions against crypto platforms.
• Experts question the timing of the missing texts, especially given their overlap with the FTX collapse and other crypto events.

A recent report from the U.S. Securities and Exchange Commission (SEC) revealed that almost a year’s worth of text messages from former SEC Chair Gary Gensler’s phone went missing. This data loss occurred between October 2022 and September 2023, a period critical to the crypto industry. Experts are questioning the timing of the loss, particularly given its overlap with the FTX collapse and other major crypto events.

SEC Blames Technology Failures for Missing Texts

The SEC’s Office of Inspector General (IG) released a report attributing the missing messages to avoidable technological failures within the agency. According to the report, the SEC’s Office of Information Technology failed to manage system changes and ignored critical software alerts. The agency also lacked adequate backup procedures, which ultimately led to the permanent loss of the text messages.

This technology failure impacted key communications on Gensler’s government-issued phone, including discussions on crypto regulations. Some of the missing texts included a May 2023 conversation about possible legal action against certain crypto asset platforms. The SEC was unable to recover these messages despite efforts, with only about 1,500 out of the total messages found.

The SEC also revealed that a significant portion, 38%, of the recovered text conversations were considered “mission related.” These missing texts are particularly concerning because they covered vital crypto discussions. As Nate Geraci, President of NovaDius Wealth Management, pointed out, the period coincided with major events like the FTX collapse and the Grayscale Bitcoin ETF lawsuit.

Timing of Missing Texts Raises Questions About FTX Collapse

Crypto expert Nate Geraci raised serious concerns about the timing of the missing texts. He pointed out that a full year’s worth of messages vanished, covering a crucial period for the crypto industry. This period included the FTX collapse, a pivotal moment in crypto, and regulatory decisions related to the Grayscale Bitcoin ETF lawsuit. Geraci questioned how such critical communications could be lost during such a significant period.

Rumors have suggested that Gensler may have had direct communication with Sam Bankman-Fried (SBF) or other FTX representatives. This further fuels concerns about whether these lost messages might have contained critical details about the FTX collapse. It is unclear whether any key meetings or discussions between Gensler and FTX occurred, but the missing texts raise doubts.

The timing of these missing texts also draws attention to Gensler’s role in the crypto industry. His tenure as SEC Chair is often marked by his tough stance on crypto regulations, particularly with platforms like FTX. The FTX collapse, which occurred in November 2022, has been linked to a series of failures in the industry, and Gensler’s role in overseeing the sector has been scrutinized.

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