SEC Watchdog Blames Tech Failures for Loss of Gary Gensler’s Texts in 2023

The U.S. Securities and Exchange Commission lost nearly a year of text messages from former Chair Gary Gensler, according to a review by the agency’s Office of the Inspector General released on Wednesday.

The SEC’s OIG is responsible for conducting audits, evaluations, and investigations into the SEC’s programs and operations.

On July 6, 2023, Gary Gensler’s SEC-issued smartphone stopped syncing with the agency’s device management system, even though it “otherwise functioned normally and was used regularly,” the report said.

For the next 62 days, it appeared “inactive,” a status that went unnoticed by IT staff.

A month later, on August 10, the Office of Information Technology introduced a policy to automatically wipe any device that had not connected for 45 days, assuming it was lost or stolen. 

Under that rule, Gensler’s phone was wiped.

When he arrived at SEC headquarters on September 6, 2023, and discovered agency apps missing, Gensler approached staff for help.

Investigators said personnel, unaware of what had occurred, tried to restore the phone and instead performed a factory reset that permanently deleted nearly a year of text messages, covering October 18, 2022, through September 6, 2023.

Missed warnings, poor vendor coordination, and weak change-management practices were also cited as factors that compounded the failure.

The Office of the Inspector General serves as the agency’s independent watchdog under the Inspector General Act of 1978, reporting both to the SEC Chair and to Congress.

Lost legacy

Nearly a year of Gensler’s lost text messages coincided with the SEC’s war on crypto.

In January 2023, the agency charged Genesis and Gemini over unregistered offerings, while lender Nexo agreed to a $45 million settlement.

The following month, it fined Kraken $30 million for its staking service and warned Paxos that its Binance-branded stablecoin could be an unregistered security.

By April, Gensler told Congress that most crypto tokens meet the Howey Test, reinforcing his stance that they fall under securities law. Internal records later revealed the SEC had already labeled Ethereum a security in March 2023.

After his tenure at the SEC, Gensler returned to MIT, where he now teaches and does research on artificial intelligence, financial technology, and public policy.