SEC under fire after Gary Gensler’s texts wiped during FTX collapse

“Preventable errors” led to the loss of Gary Gensler’s text messages during the crucial period of the FTX collapse, a new report shows.

Summary

• The Inspector General’s report shows the list of errors that led to the loss of Gary Gensler’s texts.
• Texts lost were those during the period of the FTX collapse, causing criticism
• Coinbase CLO called the scandal “destruction of evidence”

The SEC lost all the messages from the former Chair, Gary Gensler’s official mobile device due to preventable errors, a new report shows. Inspector General’s Report No. 587, dated September 3, states that IT errors and poor oversight led to the loss of Gensler’s texts during the crucial period of the FTX collapse.

According to the report, Gensler’s phone stopped syncing with the agency’s systems on July 6, 2023, due to an error. Afterward, his phone was automatically wiped, causing the loss of all data. This was due to a policy introduced in August that required automatically wiping any phone disconnected from the system for 45 days.

At this point, recovering the messages would still have been possible, the report says. However, when the IT team tried to restore the phone, they mistakenly performed a factory reset. This erased all messages from October 18, 2022, through September 6, 2023.

Gary Gensler’s text scandals condemned by crypto leaders

The dates of the texts significantly overlapped with the collapse of FTX. Notably, the crypto exchange declared bankruptcy in November 2022, while its founder, Sam Bankman-Fried, was convicted in November 2023. This led to widespread criticism from industry experts, including Coinbase’s CLO Paul Grewal.