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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