July 21, 2024

How a post on SEC’s social media account led to rise and fall in price of the world’s biggest cryptocurrency — all in 15 minutes

Wall Street’s top regulator, the SEC, faced a major cybersecurity incident on Tuesday, throwing the highly anticipated decision on Bitcoin ETFs into disarray. A fake post claiming approval for the products, originating from a compromised SEC account on X, sent the cryptocurrency‘s price soaring briefly before authorities launched an investigation.

According to a report in Bloomberg, the breach gave fodder to crypto faithful who have long viewed the commission’s chair, Gary Gensler, as an enemy due to his zeal to rein in the industry. The irony of a cybersecurity incident befalling a regulator that’s repeatedly warned of crypto’s online vulnerabilities was not lost on critics who have spent years waiting for the SEC to approve a Bitcoin ETF. Traders have been speculating for weeks that the agency could approve several of the products as soon as Wednesday (January 10).

Kurt Gottschall, a partner at law firm Haynes Boone and former SEC regional director, told Bloomberg, “It really shows the breadth and frequency of cyberattacks.” “The irony here is that the SEC has not shown much sympathy to public companies and asset managers that have experienced cybersecurity incidents,” he added.

How it happened
For 15 minutes, the cryptocurrency industry across the world was all euphoric. Reason: At 4:11 p.m. Tuesday (January 9), 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 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.

What SEC said
The regulator said in a statement that it would work with law enforcement to investigate the incident, the unauthorized access had been terminated, and that the post wasn’t made by the SEC or its staff. In a separate statement, Gensler clarified that no decision on ETFs had been made.

The SEC said that there was unapproved activity on the @SECGov X account “by an unknown party for a brief period of time shortly after 4 pm ET” on Tuesday. After the fake post was removed, Joe Benarroch, head of business operations at X, said in a statement that the “account is secure and we are investigating the root cause.”

The social media service said in a post that “an unidentified individual” compromised the SEC’s account by acquiring control of an associated phone number. It added that the account didn’t have two-factor authentication enabled at the time of the incident. Such authentication adds an extra layer of security that’s become increasingly common as cyberattacks proliferate.

What is ETF Controversy
Several companies have applied to list ETFs backed by Bitcoin in the US. The SEC has until January 10 to take action on at least one of those applications. Crypto insiders have been expecting SEC to announce a few decisions on this on the date.

In the last few months, prices of Bitcoin have gone up based on the optimism that an SEC approval is on the cards. An announcement was widely expected this week, with major financial companies like BlackRock and Fidelity poised to launch the bitcoin products.

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