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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Salame’s lawyers requested the court to impose a maximum prison sentence of 18 months. But prosecutors said a significant prison sentence was necessary, well beyond the 18-month sentence requested by Salame.

Prosecutors stated that Salame’s claim that his crimes were aimed only at helping FTX and the cryptocurrency industry is not a mitigating factor and is contradicted by the evidence. “It contradicts the evidence that he benefited personally in many ways,” they said.

“Only a substantial prison sentence can appropriately reflect the nature and seriousness of his actions and provide sufficient deterrence,” prosecutors added.

However, Salame’s lawyers argued that their client did not play a central role in the fraudulent activities and that he lost much of his personal wealth with the collapse of FTX. Former FTX CEO Sam Bankman-Fried was convicted of defrauding customers and sentenced to nearly 25 years in prison.

Salame’s sentence will be determined in a New York court on May 28. From 2019 to 2022, Salame served as a senior executive at Alameda Research and then FTX.com.

Prosecutors said Salame committed serious crimes to promote FTX’s growth and polish Bankman-Fried’s image.

“Campaign finance crimes are one of the largest in American history, with more than $1 billion exchanged in the unlicensed money transfer business without proper oversight,” prosecutors also said.

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