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  • Writer's pictureThe San Juan Daily Star

How a hack of the SEC’s social media account caused a bitcoin frenzy, briefly

The U.S. Securities and Exchange Commission building in Washington, Nov. 9, 2022. The X account of the Securities and Exchange Commission announced the approval of an investment product linked to Bitcoin. It wasn’t true. (T.J. Kirkpatrick/The New York Times)

By David Yaffe-Bellany

For 15 minutes, the cryptocurrency industry was euphoric.

At 4:11 p.m. Tuesday, the official X account of the Securities and Exchange Commission announced that regulators had approved a new investment product tracking the price of bitcoin, an apparent victory for embattled crypto supporters. Coinbase, a giant crypto exchange, posted a celebratory banner. Crypto executives hailed it as a historic day for the industry. Bitcoin’s price spiked.

Then at 4:26 p.m., Gary Gensler, chair of the SEC, posted that the agency’s account had been compromised, resulting in an “unauthorized tweet.” An SEC spokesperson confirmed the hack in an emailed statement.

The security breach was the latest twist in the crypto industry’s yearslong pursuit of an investment vehicle known as an exchange traded fund tied to the price of bitcoin. Since the fall, crypto enthusiasts have counted down the days until a Jan. 10 deadline for the SEC to decide whether to allow a bitcoin ETF. Bitcoin’s price has surged more than 60% in recent months, driven by the rising optimism that an approval was imminent.

An announcement was widely expected this week, with major financial firms like BlackRock and Fidelity poised to launch the bitcoin products. On social media, speculation has raged about the exact timing of an approval, inspiring memes about once-obscure SEC procedures and propelling ETF analysts to online stardom.

But the industry will have to wait.

“The SEC has not approved the listing and trading of spot bitcoin exchange-traded products,” Gensler wrote in his post.

The identity of the person who breached the SEC’s account on X, formerly Twitter, remains unknown. But X’s corporate safety account posted a statement saying the hacker had obtained “control over a phone number” associated with the SEC’s official handle on the site. The statement said the SEC had not enabled two-factor authentication, a common security tool that requires an extra layer of verification to gain access to online accounts.

A representative for X did not immediately respond to a request for comment.

The possibility of a bitcoin ETF has captivated crypto investors for more than a decade. An ETF is a basket of assets, with shares trading on traditional exchanges like the Nasdaq. Investors in a bitcoin version would own part of a basket containing bitcoin, sparing them some of the risks and inconveniences associated with buying cryptocurrencies directly.

Crypto enthusiasts have long hoped the financial product’s approval would draw billions of dollars of new investment to the industry, attracting wealth managers who in the past had hesitated to put client money into crypto.

For years, the SEC resisted the industry’s entreaties, arguing that the crypto market was ripe for manipulation. But in August, the agency lost a legal battle with one of the companies hoping to offer the bitcoin fund, paving the way for its approval.

That legal win was a rare bright spot in a bleak period for the crypto industry. Since mid-2022, crypto prices have collapsed, and several major firms have filed for bankruptcy, leading to criminal prosecutions. Gensler has led the charge against the industry, bringing lawsuits against prominent companies like Coinbase and its largest international rival, Binance.

So the crypto industry was primed to celebrate when the social media post was published on the SEC’s official X account late Tuesday afternoon. A short statement appeared above a thumbnail image of Gensler.

“Today the SEC grants approval for Bitcoin ETFs for listing on all registered national securities exchanges,” the post said. “The approved Bitcoin ETFs will be subject to ongoing surveillance and compliance measures to ensure continued investor protection.”

The price of bitcoin briefly shot up to nearly $48,000, before dropping closer to $45,000 after the SEC announced the hack.

Stephanie Allen, a spokesperson for the agency, said “an unknown party” gained access to the SEC’s account for a brief period shortly after 4 p.m.

“That unauthorized access has been terminated,” she said. “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.”

On social media, online sleuths circulated screenshots showing that the compromised SEC account had also liked various crypto-related posts. Cameron Winklevoss, a founder of the crypto firm Gemini, accused the agency of “manipulating markets and hurting U.S. investors.”

“The SEC would demand accountability from a public company if they made such a colossal market-moving mistake,” Sen. Bill Hagerty, R-Tenn., posted. “Congress needs answers on what just happened.”

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