On Monday, the US Securities and Exchange Commission (SEC) revealed that the fake spot Bitcoin ETF announcement through its X account ahead of the real announcement had been through a SIM swap attack.
The SEC shared details in a statement and revealed that its official X account had been compromised and had thrown the crypto market into turmoil.
It had been due to the fake announcement posted, which stated that the regulatory body had approved the long-awaited bitcoin ETFs.
The reveal
The securities regulator consulted with its telecom carrier and discovered that the cell phone number associated with its account had been accessed by an unauthorized party.
The SEC stated that it was a ‘SIM swap attack’, where the unauthorized party had taken control of the phone number and then reset the password for the official SEC account on X.
According to the regulator, it is coordinating with several federal oversight and law enforcement entities in the ongoing investigation.
Their goal is to identify the unauthorized party and to discover how they were able to get the phone carrier of the SEC to change the SIM associated with the account.
They also want to figure out how the unauthorized party had known the phone number associated with said account.
The issues
The SEC also disclosed that since July 2023, the SEC had disabled two-factor authentication (2FA) for the official account because the staff had requested so.
This is because they were experiencing issues with accessing the account. The regulator’s failure to enable 2FA on its X account goes against the recommendation of its chairman.
In October 2023, Gary Gensler posted on X that he had urged people to use 2FA to protect against fraud and identity theft.
The impact
Due to the incident, the crypto market had been thrown into chaos because it had been waiting on tenterhooks for the SEC’s decision regarding the fate of numerous spot Bitcoin ETF applications.
After the fake announcement was retracted by chairman Gensler via a tweet and the SEC’s account also published a follow-up tweet, the price of Bitcoin nosedived.
The next day, the SEC issued the real approval of the spot Bitcoin ETFs, which allowed them to officially begin trading.
The social media blunder of the regulatory body prompted people to question the SEC chairman. This included Senators Thom Tillis and JD Vance.
The two senators noted that the incident highlighted serious concerns about the cybersecurity procedures that are followed by the regulator.
The fake announcement had come close to the SEC’s deadline for approving spot Bitcoin ETF applications.
Therefore, it caused such a flurry in the market because participants had already been anticipating the approval of the new investment product.