OIG found that the deleted messages included discussions on the FTX collapse, Grayscale’s spot Bitcoin ETF case, and major enforcement actions. Some messages also involved senior-level talks with the White House. 

Gensler’s Lost Messages Impacted Key Crypto Processes 

According to the report, in August 2023, Gensler’s government phone was mistakenly marked as inactive. This action permanently deleted stored texts and system records. The IT department could not explain why the phone disconnected from SEC systems or why the deletion occurred. 

Researchers analyzed around 1,500 texts. They determined that 38% were work-related and directly connected to SEC’s critical operations. Examples included discussions on a crypto platform lawsuit in May 2023, a proposed settlement with a global financial firm in June, and an upcoming White House meeting in July. 

SEC Faces Criticism 

The deleted messages coincided with SEC’s strict enforcement of record-keeping rules across Wall Street. Major banks such as JPMorgan, Goldman Sachs, and Citigroup faced penalties for failing to archive communications via WhatsApp and Signal. 

Coinbase General Counsel Paul Grewal emphasized that, despite years of lessons on data protection, SEC leadership failed to preserve crucial communications during a pivotal period. He argued that this was not a simple error but a deliberate loss of evidence related to ongoing cases. 

In response, SEC disabled messaging features on most devices, informed the National Archives, launched Capstone record-keeping training for senior officials, and upgraded backup systems. 

Ultimately, the lost messages raised serious questions about SEC’s regulatory effectiveness and oversight of the crypto industry. 

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They expressed alarm over DOJ’s lack of attention to crypto mixers, labeling them as “essential tools for cybercriminals.”

DOJ Says It’s Not a Regulator

On April 7, DOJ official Todd Blanche defended the shutdown with the claim:

“The Department of Justice is not a digital assets regulator.”

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Democrats disagreed strongly, stating that a passive stance toward technology used in major crimes is “nonsensical.” They also cited DOJ’s apparent refusal to pursue Bank Secrecy Act violations, creating what they describe as a systemic vulnerability in the digital asset space.

Trump Family’s Crypto Links Under Scrutiny

The senators also pointed to potential conflicts of interest involving Donald Trump and his family. According to the letter, the DOJ’s actions may be tied to Trump’s crypto ambitions.

The Trump-backed World Liberty Financial is launching a stablecoin, while Eric Trump and Donald Trump Jr. are planning a new crypto mining company, American Bitcoin.

In the letter, they wrote:

“Your decisions give rise to concerns that President Trump’s interest in selling his cryptocurrency may be the reason for easing law enforcement scrutiny.”

They requested a full staff-level briefing from the DOJ by May 1 to explain the rationale behind the closure.

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