The IT department of the U.S. Securities and Exchange Commission (#SEC ) accidentally deleted the archive of text messages from former chairman Gary Gensler for a year — precisely during the period when the agency was actively pursuing crypto companies. The investigation revealed that department errors led to the irreversible loss of correspondence from October 2022 to September 2023.

The SEC's Office of Inspector General published a report revealing details of what happened. The IT department 'implemented a poorly understood and automated policy that led to the corporate wipe of Gensler's government mobile device.' The process deleted both stored text messages and system logs.

The situation was exacerbated by several factors:

  • Ineffective change management

  • Lack of proper backups

  • Ignoring system warnings

  • Unresolved vendor software issues

The IT department was unable to collect or maintain the necessary log data, so the commission never determined why Gensler's smartphone stopped communicating with the SEC's mobile device management system.

What the lost messages contained

Investigators recovered about 1,500 messages from correspondence with colleagues and other sources. It turned out that most of them represented federal records, and about 38% of the recovered text conversations related to issues directly connected with the work of the SEC's senior management.

Among Gensler's deleted messages were texts related to the SEC's enforcement actions against cryptocurrency companies and their founders. This means that key communications about how and when the SEC initiated cases may never become fully known—to the courts, Congress, or the public.

Particularly telling was an example from the report: 'A conversation in May 2023 involving Gensler, his staff, and the Director of the Division of Enforcement about when the SEC would file a lawsuit against certain cryptocurrency trading platforms and their founder.'

Around the same time that Gensler's messages disappeared, the SEC tightened control over the use of messaging apps. Several global investment banks and financial institutions were accused of violating record-keeping laws under the Securities Exchange Act of 1934.

"Finance ultimately depends on trust. By failing to fulfill their obligations to maintain documentation and records, the market participants we are accusing today could not uphold that trust," Gensler stated at the time.

Since then, the SEC has disabled text messaging on most devices, notified the National Archives and Records Administration about the lost records, implemented specialized training for senior officials, and started improving backup practices for senior management devices.

The reaction of the crypto community

The loss of messages may affect the SEC's responses to certain Freedom of Information Act requests, the report notes. Gensler, who resigned in January, was known in the crypto community for his call to everyone to 'come and register,' which preceded multiple SEC actions against companies claiming they were trying to do just that.

"Think about everything that was happening in the crypto market at that time. Essentially, from the collapse of FTX to the Grayscale lawsuit regarding the spot bitcoin ETF," noted Nate Geraci, president of NovaDius Wealth Management, adding: 'makes you think.'