SEC’s Text Wipe Raises Questions About Its Own Recordkeeping Rigor

The U.S. Securities and Exchange Commission (SEC) has confirmed the loss of nearly a year’s worth of text messages from former Chair Gary Gensler’s government-issued mobile device between October 2022 and September 2023. An internal audit by the SEC Office of Inspector General (OIG) concluded that the loss stemmed from “avoidable errors” committed by the agency’s IT department, including a poorly understood automated policy that triggered an enterprise wipe of Gensler’s phone. The report emphasized that the incident occurred during a pivotal period for the crypto industry, coinciding with the FTX collapse, the Grayscale Bitcoin ETF lawsuit, and a surge in crypto-related enforcement actions by the SEC [1].

The OIG investigation identified several contributing factors, including poor change management practices, lack of proper backups, ignored system alerts, and unresolved software flaws from vendors. Additionally, the IT department failed to retain critical log data, which hindered efforts to determine why Gensler’s device stopped connecting to the SEC’s mobile device management system. As a result, the agency was unable to fully trace the cause of the wipe or prevent the deletion of sensitive communications, including discussions related to enforcement actions against crypto platforms and their founders [2]. The report noted that nearly 1,500 messages were recovered from colleagues and other sources, with approximately 38% deemed “mission related” and directly tied to SEC operations [3].

Among the recovered texts were conversations involving Gensler, his senior staff, and the Enforcement Division Director in May 2023 about the timing of actions against certain crypto trading platforms. Other recovered messages included discussions with a SEC Commissioner over a proposed settlement with a major financial institution and a July conversation about an upcoming meeting with the White House. These communications highlight the strategic and regulatory significance of the lost data, as they pertain to core SEC functions and high-level decision-making [1]. Nate Geraci, president of NovaDius Wealth Management, described the situation as “serious,” given the timing and content of the lost messages. He emphasized that the period covered a series of critical events, including the collapse of FTX and the legal challenges surrounding the Grayscale Bitcoin ETF [2].

The incident has drawn scrutiny for its implications on transparency and accountability. Coinbase’s Chief Legal Officer, Paul Grewal, criticized the SEC for what he described as a “deliberate destruction of evidence” relevant to ongoing litigation, highlighting the irony of the agency’s strict enforcement of recordkeeping rules against private institutions while failing to preserve its own records. The OIG also noted that the missing messages could affect the SEC’s ability to respond to Freedom of Information Act (FOIA) requests, raising further questions about the agency’s preparedness and transparency in handling sensitive regulatory matters [2].

In response, the SEC has taken several corrective measures, including disabling text messaging on most agency-issued devices, notifying the National Archives of the lost records, and initiating Capstone-specific records training for senior officials. The agency has also implemented improved backup systems for senior staff. These steps come as the SEC, now led by Chair Paul Atkins, has signaled a shift in its approach to crypto regulation, with recent proposals aiming to ease compliance burdens and support innovation in the digital asset sector [4]. However, the loss of Gensler’s texts remains a significant oversight that could complicate the agency’s ability to defend its regulatory decisions during this period, particularly as courts and Congress demand greater clarity on its actions. The incident underscores the broader challenges of balancing technological modernization with robust data governance in high-stakes regulatory environments.

Source: [1] SEC Report Faults Errors For Loss Of Gensler's Texts (https://cointelegraph.com/news/avoidable-errors-led-to-the-loss-of-gary-gensler-text-messages-sec) [2] SEC Blunder Wipes Former Chair Gensler's Texts from Key ... (https://cryptopotato.com/sec-blunder-wipes-former-chair-genslers-texts-from-key-crypto-period/) [3] The Gary Gensler Files: Missing Texts Correlate to FTX ... (https://coingape.com/the-gary-gensler-files-missing-texts-correlate-to-ftx-collapse-timing-says-expert/) [4] US SEC unveils agenda to revamp crypto policies, ease ... (https://www.reuters.com/legal/government/us-sec-unveils-agenda-revamp-crypto-policies-ease-wall-street-rules-2025-09-04/)