by Coinstrooper Crypto Articles
Quick Take
  • The probe is being led by Financial Services Committee members French Hill, Dan Meuser, Ann Wagner, and Bryan Steil, who chair oversight subcommittees.
  • The inquiry follows a September report by the SEC’s Office of Inspector General (OIG), which reviewed how Gensler’s communications were erased.
  • According to the report, his SEC-issued smartphone stopped syncing with the agency’s device management system on July 6, 2023.
  • Despite functioning normally, the phone was flagged as “inactive” for 62 days.

What Happened

House Republicans have launched an investigation into the deletion of nearly a year’s worth of text messages from former Securities and Exchange Commission (SEC) Chair Gary Gensler, raising concerns about IT mismanagement, compliance with federal recordkeeping laws, and transparency at the financial regulator.

Lawmakers said they expect full transparency from the SEC as the investigation moves forward.

For asset managers, it removes the final regulatory roadblock to diversifying crypto-backed investment products on Wall Street.

Market Context

Financial Committee members also noted that this is not the first time Gensler’s recordkeeping has been questioned. In 2013, while leading the Commodity Futures Trading Commission, he was criticized by that agency’s inspector general for using personal email to conduct official business.

Why It Matters

The probe is being led by Financial Services Committee members French Hill, Dan Meuser, Ann Wagner, and Bryan Steil, who chair oversight subcommittees. In a letter to current SEC Chair Paul Atkins, they expressed concerns that Gensler may have received special treatment, since his phone was wiped later than policy dictated.

In an attempt to recover some information, OIT compiled a list of 34 agency employees Gensler was most likely to have texted. However, the list did not include other commissioners, and Gensler himself did not participate in verifying it.

The inspector general noted that even after the phone wipe, the data could have been preserved, but the subsequent factory reset ensured permanent deletion. This raised alarms about OIT’s decision-making and the SEC’s ability to safeguard official records.

His successor, Paul Atkins, has signaled a sharp pivot. In his first crypto roundtable, Atkins criticized Gensler’s heavy-handed tactics and pledged to pursue balanced rules that foster both innovation and accountability.

Details

The inquiry follows a September report by the SEC’s Office of Inspector General (OIG), which reviewed how Gensler’s communications were erased. According to the report, his SEC-issued smartphone stopped syncing with the agency’s device management system on July 6, 2023. Despite functioning normally, the phone was flagged as “inactive” for 62 days.

On August 10, 2023, the SEC’s Office of Information Technology (OIT) adopted a new policy requiring remote wiping of devices inactive for 45 days. Gensler’s phone, however, was not wiped until September 6, weeks after the cutoff date.

Instead of securing the data, OIT staff performed a factory reset, permanently erasing the device’s contents. Because the phone had not been backed up since October 18, 2022, nearly a year of text messages was lost.

Similarly, Coinbase accused the agency of destroying records and sought sanctions in a Washington court filing tied to a Freedom of Information Act case.

SEC OIG Finds Gensler Deleted Substantive Texts as Lawmakers Slam Double Standard on Recordkeeping

Although staff claimed Gensler used text messaging mainly for scheduling, the OIG found otherwise. Its review uncovered multiple instances of substantive, mission-related communications between Gensler, his staff, fellow commissioners, and senior SEC officials.

House committee members pointed out that the SEC aggressively enforced recordkeeping rules against financial institutions while failing to meet them internally.

In fiscal year 2023, the SEC collected more than $400 million in settlements from 25 advisory firms, broker-dealers, and credit rating agencies for violating federal recordkeeping laws.

Gensler himself repeatedly emphasized the importance of maintaining business communications.

“As technology changes, it’s even more important that registrants appropriately conduct their communications within only official channels,” he said in 2023. Lawmakers argue that his agency did not meet the very standards it demanded of others.

Moving forward, the committee seeks to coordinate with the SEC’s inspector general to seek more information, address unanswered questions, and explore whether additional oversight measures are needed.

Gensler Out, Atkins In: SEC Shifts Toward Balanced Crypto Rules and Wider ETF Access

Former SEC Chair Gary Gensler left after a rocky tenure marked by lawsuits, delayed ETF approvals, and criticism of “regulation by enforcement.” Crypto firms, including Coinbase, argued his approach created uncertainty and pushed companies offshore, while court rulings overturned some SEC decisions.

Meanwhile, Gensler defended his focus on consumer protection, but his clashes with the industry left deep divides. His departure opens the door for new SEC leadership, with the crypto sector hoping for clearer rules and broader approval of digital asset products.

That shift is already visible: the SEC has approved generic listing standards for Nasdaq, Cboe BZX, and NYSE Arca, a move that opens the door to spot ETFs tied not only to Bitcoin and Ether but also to a broader range of digital assets.

The new leadership has also embraced a more flexible stance in specific cases. The SEC issued a rare No-Action Letter to DoubleZero, confirming that its 2Z token transfers will not be treated as securities transactions.