Report reveals preventable errors behind data loss
A newly released Inspector General’s report shows that the SEC lost all text messages from Gary Gensler’s official phone during a crucial period surrounding the collapse of FTX. The report, dated September 3, highlights preventable IT errors and oversight failures that led to the data loss.
The issue began on July 6, 2023, when Gensler’s phone stopped syncing with the SEC’s internal systems. A subsequent policy required that any phone disconnected for 45 days be automatically wiped. This led to the loss of all data when the device was reset.
Failed recovery attempt erased key communications
According to the report, the data could still have been recovered at that point. However, the SEC’s IT staff mistakenly performed a factory reset on the device, permanently erasing all messages from October 18, 2022, through September 6, 2023.
The deleted texts cover a timeline overlapping with the November 2022 collapse of FTX and the eventual conviction of its founder, Sam Bankman-Fried, in November 2023.
Crypto leaders condemn SEC’s handling of evidence
The loss of these records has drawn sharp criticism from the crypto industry. Coinbase’s Chief Legal Officer Paul Grewal condemned the incident, describing it as more than a technical mishap.
“This isn’t some ‘oops’ moment. This was a destruction of evidence relevant to pending litigation. We all deserve better, especially from ‘leaders’ who see fit to smear others and cast aspersions so freely,” Grewal said.
The controversy adds to growing concerns about transparency and accountability within the SEC as it continues to regulate the crypto industry.
