SEC faces congressional scrutiny after social media account hack exposes weak security

Social Media platform X (formerly Twitter) revealed that the U.S. Securities and Exchange Commission (SEC) official account was compromised, in part, due to a lack of vital security measures, including two-factor authentication.

On Jan. 9, the SEC’s X account was compromised and used to post fake news about approving a spot Bitcoin exchange-traded fund (ETF). Chair Gary Gensler immediately countered the post, revealing that the regulator has yet to approve such an investment vehicle.

X’s investigation revealed that an unauthorized individual had obtained control over a phone number associated with the SEC account, adding that the regulator did not implement a two-factor authentication measure on its account.

Web3 security consultant Plumferno further said that the SEC page was “literally sim swapped.”

“They didn’t even need to post a drainer link, y’all. They just sim swapped the SEC page,” he added.

Meanwhile, the crypto community pointed out the irony in several of Gensler’s posts, urging his followers to implement strong security measures while the entity he led had lax security measures.

In one such post, Gensler advised investors to use strong passwords and set up multi-factor authentication to prevent identity theft and fraud.

U.S. lawmakers demand an explanation from the SEC.

The security breach has prompted several U.S. lawmakers to demand an official investigation.

Senator Bill Hagerty termed the event unacceptable and emphasized the necessity for the U.S. Congress to seek answers from the SEC, akin to the regulator’s demand for accountability from public companies for similar market-altering errors.

Echoing similar sentiments, Sen. Cynthia Lummis stressed the importance of transparency regarding fraudulent announcements, underscoring their potential to manipulate markets.

Senators J.D. Vance and Thom Tillis urged the SEC Chairman to provide an official explanation, criticizing the regulatory body entrusted with overseeing the global capital markets for such a significant oversight.

“It is unacceptable that the agency entrusted with regulating the epicenter of the world’s capital markets would make such a colossal error,” the lawmakers wrote.

Chairman of the House Financial Services Oversight and Investigations Subcommittee, Rep. Bill Huizenga, raised concerns regarding the SEC’s actions, questioning whether compromised accounts played a role in its regulatory process.

Rep. Ann Wagner highlighted the impact on millions of investors due to the alleged hack of the SEC’s X account, characterizing it as a clear case of market manipulation.

The lawmakers all agree that the incident has spurred a call for transparency, accountability, and a thorough investigation into the security practices governing regulatory bodies, as the repercussions extend beyond mere social media breaches to potential market manipulation affecting investors on a significant scale.