Lawmakers Are Out for Blood After a Hack of the SEC’s X Account Causes Bitcoin Chaos

A slew of US senators have demanded answers from the Securities and Exchange Commission (SEC) after a security incident has led to the publication of false and market-moving information by the financial regulator.

On January 9 at 4:11 PM ET, a message was published on the SEC’s X account announcing the approval of spot bitcoin ETFs, a type of financial product that allows people to invest in crypto assets through a regular brokerage. By 4:26 p.m., SEC Chairman Gary Gensler had issued a retraction, saying the agency’s account had been “compromised” and that an “unauthorized tweet had been posted.” The damage had already been done.

There has been speculation from the media, among others Fox Business, that the SEC could be tasked with investigating itself over market manipulation violations, as the regulator responsible for protecting U.S. investors from exactly that threat. More likely, says a former SEC lawyer who asked not to be named, given that bitcoin is classified as a commodity in the US, such an investigation would be the job of the US Commodities and Futures Trading Commission (CFTC ).

But even then, beyond the jurisdictional issue, there remain unanswered questions about the feasibility of any investigation, says Charley Cooper, former chief operating officer at the CFTC. “The idea of ​​the commodities regulator investigating the securities regulator is unprecedented,” he says. “There is no manual for this.”

In a statement, the CFTC said it has “enforcement authority” over any alleged manipulation of bitcoin, but declined to confirm whether it would open an investigation in this case.

In the minutes after the fake message was published, the price of bitcoin rose by about 2.5 percent, but has since fallen to below 2.5 percent of its original price. In total, the incident led to a $40 billion swing in the combined value of Bitcoin in circulation.

X said an “unidentified individual” used a phone number linked to the SEC’s account to take control. The account “did not have two-factor authentication enabled” at the time of the hack, said X.

In a countersigned letterRepublican Senators JD Vance and Thom Tillis demanded the SEC’s response because of the “widespread confusion” and harm to investors it had caused. The incident is “contrary to the Commission’s tripartite mission to protect investors, maintain a fair, orderly and efficient market and facilitate capital formation,” the pair wrote. Senators Bill Hagerty and Cynthia Lummis, both Republicans, added their voices to the chorus with different to inform on X.

In their letter, Vance and Tillis set a Jan. 23 deadline for the SEC to explain, among other things, its plans to investigate what happened.

In a statement, the SEC said it “will work with law enforcement and our government partners to investigate the matter and determine appropriate next steps regarding both the unauthorized access and any related misconduct,” but provided no further details.