The SEC mistakenly deleted former chairman Gensler's encryption enforcement messages, sparking conspiracy theories.

The U.S. Securities and Exchange Commission (SEC) Office of Inspector General (OIG) released an investigation report on 9/3, stating that former Chairman Gary Gensler's government-issued mobile phone text messages were “accidentally deleted” by the IT department for nearly an entire year between October 2022 and September 2023. Coincidentally, this period coincides with Gensler's tenure when there was the most intensive enforcement against the encryption industry, and now some key conversations related to encryption enforcement cannot be recovered.

SEC goes awry, Gensler's text messages were mistakenly deleted for a whole year.

OIG stated that Gensler's text messages were completely lost during this year. The reason was that the IT department executed an “understanding deficient” automation policy in August 2023, which resulted in the phones being reset, causing not only the text messages to disappear but also the operating system log files to be deleted.

The report pointed directly to improper policy design, management change oversights, lack of proper backups, ignored system alerts, and unpatched software vulnerabilities. Due to the IT department's failure to collect necessary system logs, the SEC ultimately couldn't even determine why the mobile phone could not connect.

The conversation regarding encryption law enforcement has disappeared.

The OIG emphasized that some of the deleted text messages are related to the SEC's enforcement actions against individuals in the encryption industry. They cited an example where Gensler discussed with the heads of enforcement agencies in May 2023 about “when to take legal action against certain cryptocurrency traders”; such messages are currently not traceable.

Investigators successfully pieced together about 1,500 messages from other colleagues, revealing that most were federal investigation records, and approximately 570 messages involved the decision-making processes of senior SEC officials.

The picture shows the timeline of the erroneous deletion of Gensler's text records. Gensler is the most stringent in overseeing the industry, yet internally, the operations are not effective.

Ironically, during Gensler's tenure, he publicly emphasized that trust is paramount in finance, stating that failing to comply with record-keeping obligations equates to undermining that trust. At the same time Gensler's messages were mistakenly deleted, the SEC issued hefty fines to major investment banks and financial institutions for “violating record-keeping obligations.”

Afterward, the SEC reported the record loss to the National Archives and Records Administration and took several remedial measures. Most devices had their messaging functions completely disabled, and senior personnel were required to participate in “Capstone Special Training,” while the mobile backup mechanism was also improved. The OIG also warned that this text message loss could affect the SEC's response to the inquiry request under the Freedom of Information Act (FOIA).

( Note: Capstone Special Training refers to internal training for senior officials on how to correctly preserve and transfer electronic communication records in accordance with the National Archives and Records Administration (NARA) standards.

Industry insiders frowned, mocking that the case is not simple.

Gensler resigned in January this year, and during his tenure, he had a polarizing reputation. He called on cryptocurrency operators to “register,” but also took enforcement actions against many companies, leaving the industry lamenting. The SEC's enforcement actions against the cryptocurrency industry also reached a 10-year high during his tenure.

After the news of the message deletion incident broke, external comments were filled with mockery, subtly suggesting that there might be conspiracy theories within the SEC. Caitlin Long, founder of the encryption-friendly bank Custodia Bank, joked:

“So Gensler's text message just suddenly vanished into thin air?”

Nate Geraci, the president of the wealth management company NovaDius, stated:

“Think about how many major events have happened in the cryptocurrency space during this time, from the FTX collapse to the Grayscale Bitcoin ETF lawsuit, but these messages suddenly disappeared.”

This article about the SEC mistakenly deleting former chairman Gensler's encryption enforcement messages has triggered conspiracy theory associations and first appeared in Chain News ABMedia.