The FBI is investigating a hack of the US Securities and Exchange Commission’s X account that triggered a sharp swing in the price of bitcoin. The hack occurred just after 4 pm Eastern time on January 9, 2024, with a fake announcement on X (formerly Twitter) that the securities markets regulator had approved a new investment product tracking the price of bitcoin.
The fake news sent crypto supporters into a frenzy but 15 minutes later SEC Chair Gary Gensler revealed that the tweet was ‘‘unauthorized”. As a result, bitcoin’s spot price swung between a 1.5 percent gain for the day before sliding 3.5 percent to below $46,000 as the SEC confirmed the post was fake.
Confusion reigned during the tumultuous 24 hours that followed. After denouncing the fake tweet, the SEC then made the same official announcement itself a day later – this time with legitimacy – saying it approved 11 bitcoin Exchange-Traded Funds (ETFs). Meanwhile, Elon Musk’s X blamed the SEC for the security lapse that led to the fake tweet.
Here’s what you need to know about the hack and the fallout.
The SEC referred the hack to the FBI
The SEC said “unauthorized content” on the regulator’s verified X account on Jan. 9 was “not drafted or created by the SEC”. The SEC said it was coordinating an investigation into the hack “with appropriate law enforcement entities, including the SEC’s Office of the Inspector General and the FBI”.
Musk’s X blames the SEC
Elon Musk’s X Safety blamed the SEC for a security lapse that allowed a hacker to hijack the SEC’s account. “The compromise was not due to any breach of X’s systems, but rather due to an unidentified individual obtaining control over a phone number associated with the @SECGov account through a third party,” X Safety said in a tweet. “The account did not have two-factor authentication enabled.”
At least two US Senators demanded answers
Republican Senators J. D. Vance and Thom Tillis, in a jointly signed letter, called on the SEC to address the widespread confusion and investor damage caused by the incident, describing it as contrary to the Commission’s mission. Senators Bill Hagerty and Cynthia Lummis, also Republicans, echoed their concerns.
What’s a bitcoin Exchange-Traded Fund and why does it matter?
The SEC approved 11 Exchange-Traded Funds which will be listed on Nasdaq, NYSE, and the CBOE, opening the door to cryptocurrencies for new investors. A spot bitcoin ETF allows investors to gain exposure to the price of bitcoin while avoiding the complications of owning bitcoin directly such as setting up a crypto wallet and accounts with crypto exchanges.
Does this mean bitcoin is a safe investment?
After announcing the SEC had “approved the listing and tradition” of some bitcoin ETFs, Gensler added: “We did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.” Furthermore, Gensler’s statement referred to bitcoin in critical terms as a “speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing”.