A Securities and Exchange Commission investigation has found that “avoidable errors” caused the loss of nearly a year’s worth of text messages from former Chair Gary Gensler’s phone, covering October 2022 to September 2023.
The SEC’s Office of Inspector General (OIG) examined the missing messages, which were lost during a period of heightened crypto enforcement activity.
According to a report released Wednesday, the OIG determined that the SEC’s IT department “implemented a poorly understood and automated policy” that triggered a complete wipe of Gensler’s government-issued phone, erasing text messages and operating system logs.
The loss was compounded by inadequate change management, missing backups, ignored system alerts, and unresolved vendor software issues.
The IT team also failed to maintain necessary log data, leaving the commission unable to determine why Gensler’s phone stopped communicating with the SEC’s mobile device management system.
Key communications about crypto enforcement were lost
The OIG found that some of Gensler’s deleted texts pertained to SEC enforcement actions against crypto companies and their founders. This means crucial details about how and when the SEC pursued these cases may never be fully known, even to courts, Congress, or the public.
Investigators reviewed roughly 1,500 messages recovered from colleagues and other records. They concluded that most of these were federal records, with about 38% of the recovered conversations considered “mission-related,” covering matters directly involving SEC senior staff at the time, such as:
“A May 2023 conversation involving Gensler, his staff, and the Director of the Division of Enforcement about when the SEC would be filing an action against certain crypto asset trading platforms and their founder.”
SEC crackdown on recordkeeping
Around the same time Gensler’s messages vanished, the SEC was tightening rules on messaging apps. Several global investment banks and financial institutions were charged with violating recordkeeping and books-and-records requirements under the 1934 Securities and Exchange Act.
“Finance, ultimately, depends on trust. By failing to honor their recordkeeping and books-and-records obligations, the market participants we have charged today have failed to maintain that trust,” Gensler said at the time.
Undermining transparency in crypto decisions
Since then, the SEC has disabled text messaging on most devices, informed the National Archives and Records Administration about the lost records, introduced Capstone-specific records training for senior officials, and improved backup practices for leadership devices.
“The loss of Gensler’s text messages may affect the SEC’s ability to respond to certain Freedom of Information Act requests,” the agency noted.
Gensler, who stepped down in January, was a controversial figure in the crypto community. His earlier call for companies to “come in and get registered” preceded multiple SEC actions against firms claiming they had tried to comply. Enforcement actions against crypto companies hit a 10-year high in 2023.
“Think about everything that happened in crypto during this time—from the FTX collapse to the Grayscale spot BTC ETF lawsuit,” said NovaDius Wealth Management President Nate Geraci. “It really makes you think.”
“So Gary Gensler’s text messages from his tenure as SEC chairman are forever lost in a mysterious ‘boating accident’ ???” joked Custodia Bank founder Caitlin Long.
