Fake Bitcoin ETF Approval: SEC’s X Account Lacked 2FA; Lawmakers Seek Investigation

by Arnab Shome
  • Two-factor authentication (2FA) requires two distinct forms of identification for login.
  • The false tweet momentarily pushed Bitcoin prices 4 percent higher.
SEC
Gary Gensler, the SEC's Chairman

On Tuesday afternoon, the official X (formerly Twitter) account of the Securities and Exchange Commission (SEC) posted a much-anticipated tweet: “Today the SEC grants approval for Bitcoin ETFs for listing on all registered national securities exchanges.” However, it was a false announcement as the SEC X account was hacked.

SEC
Screenshot of the fake Bitcoin approval tweet

SEC Failed to Secure Its X Account

According to the Safety team at X, the compromise was “due to an unidentified individual obtaining control over a phone number associated with the [SEC] account through a third party.”

The “preliminary investigation” of X further found that the SEC account “did not have two-factor authentication enabled at the time the account was compromised.” This raised massive security concerns on the part of the regulator.

Prompt Action Failed in Damage Control

After the false tweet, the SEC's Chief, Gary Gensler, quickly announced from his personal X account that the official X account of the regulator was compromised, and the fake tweet was deleted in about 30 minutes. However, the damage was already done.

Some theories of an “inside job” and “fat finger” mistake were floated around. However, X’s confirmation of a compromised phone number debunked those theories.

The false announcement was made a day before the deadline for the SEC’s decision on the spot Bitcoin ETF application submitted by Ark and 21Shares. Although the regulator has been delaying or rejecting Bitcoin ETF applications since 2013, this time, the industry is anticipating approval. Even two top Bloomberg analysts have put 90 percent odds on the approval before the Wednesday deadline.

Crypto Market Reacts Quickly

The already bullish demand for Bitcoin momentarily jumped 4 percent in response to a false tweet from the compromised X account of the SEC. However, the prices swiftly corrected once the inaccuracy of the announcement came to light. There are some speculations that the hackers might have benefited from the Bitcoin price swings caused by the fake announcement.

The spike in the price was caused by the fake Bitcoin ETF approval tweet
The spike in the price was caused by the fake Bitcoin ETF approval tweet

Allegations of “Market Manipulation”

Earlier, Gensler was vocal about cybersecurity for financial services firms. He even encouraged investors to secure their financial accounts. However, the lack of 2FA for the regulator’s X account raised basic security questions.

The regulator is now facing backlash from a section of lawmakers and other pro-crypto lawyers and influencers. Most are pointing at “market manipulation” of Bitcoin prices caused by the fake tweet. Senator Bill Hagerty has demanded an answer from the SEC on the “market-moving mistake”.

Another state legislator questioned the “horrible rulemaking” by the SEC.

Crypto industry entrepreneurs and influencers additionally criticized the SEC, which is actively engaged in legal battles with multiple crypto companies for alleged securities law violations, for manipulating the markets.

Meanwhile, murmurs from the securities lawyers indicate that the SEC needs to “investigate itself” for possible market manipulation.

"The SEC will work with law enforcement and our partners across government to investigate the matter and determine appropriate next steps relating to both the unauthorized access and any related misconduct," an SEC spokesperson told the media.

On Tuesday afternoon, the official X (formerly Twitter) account of the Securities and Exchange Commission (SEC) posted a much-anticipated tweet: “Today the SEC grants approval for Bitcoin ETFs for listing on all registered national securities exchanges.” However, it was a false announcement as the SEC X account was hacked.

SEC
Screenshot of the fake Bitcoin approval tweet

SEC Failed to Secure Its X Account

According to the Safety team at X, the compromise was “due to an unidentified individual obtaining control over a phone number associated with the [SEC] account through a third party.”

The “preliminary investigation” of X further found that the SEC account “did not have two-factor authentication enabled at the time the account was compromised.” This raised massive security concerns on the part of the regulator.

Prompt Action Failed in Damage Control

After the false tweet, the SEC's Chief, Gary Gensler, quickly announced from his personal X account that the official X account of the regulator was compromised, and the fake tweet was deleted in about 30 minutes. However, the damage was already done.

Some theories of an “inside job” and “fat finger” mistake were floated around. However, X’s confirmation of a compromised phone number debunked those theories.

The false announcement was made a day before the deadline for the SEC’s decision on the spot Bitcoin ETF application submitted by Ark and 21Shares. Although the regulator has been delaying or rejecting Bitcoin ETF applications since 2013, this time, the industry is anticipating approval. Even two top Bloomberg analysts have put 90 percent odds on the approval before the Wednesday deadline.

Crypto Market Reacts Quickly

The already bullish demand for Bitcoin momentarily jumped 4 percent in response to a false tweet from the compromised X account of the SEC. However, the prices swiftly corrected once the inaccuracy of the announcement came to light. There are some speculations that the hackers might have benefited from the Bitcoin price swings caused by the fake announcement.

The spike in the price was caused by the fake Bitcoin ETF approval tweet
The spike in the price was caused by the fake Bitcoin ETF approval tweet

Allegations of “Market Manipulation”

Earlier, Gensler was vocal about cybersecurity for financial services firms. He even encouraged investors to secure their financial accounts. However, the lack of 2FA for the regulator’s X account raised basic security questions.

The regulator is now facing backlash from a section of lawmakers and other pro-crypto lawyers and influencers. Most are pointing at “market manipulation” of Bitcoin prices caused by the fake tweet. Senator Bill Hagerty has demanded an answer from the SEC on the “market-moving mistake”.

Another state legislator questioned the “horrible rulemaking” by the SEC.

Crypto industry entrepreneurs and influencers additionally criticized the SEC, which is actively engaged in legal battles with multiple crypto companies for alleged securities law violations, for manipulating the markets.

Meanwhile, murmurs from the securities lawyers indicate that the SEC needs to “investigate itself” for possible market manipulation.

"The SEC will work with law enforcement and our partners across government to investigate the matter and determine appropriate next steps relating to both the unauthorized access and any related misconduct," an SEC spokesperson told the media.

About the Author: Arnab Shome
Arnab Shome
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About the Author: Arnab Shome
Arnab is an electronics engineer-turned-financial editor. He entered the industry covering the cryptocurrency market for Finance Magnates and later expanded his reach to forex as well. He is passionate about the changing regulatory landscape on financial markets and keenly follows the disruptions in the industry with new-age technologies.
  • 6241 Articles
  • 79 Followers

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