How a Hack of the S.E.C.’s Social Media Account Caused a Bitcoin Frenzy, Briefly

For 15 minutes, the cryptocurrency industry was euphoric.

At 4:11 p.m. on Tuesday, the official X account of the Securities and Exchange Commission announced that regulators had approved a new investment product tracking the price of Bitcoin, an apparent victory for the embattled crypto industry. Coinbase, a giant crypto exchange, posted a celebratory banner. Crypto fans hailed it as a historic day for the industry.

Then at 4:26 p.m., Gary Gensler, the chair of the S.E.C., posted that the agency’s account had been compromised, resulting in an “unauthorized tweet.” An S.E.C. spokeswoman confirmed the hack in an emailed statement.

The security breach was the latest twist in the crypto industry’s yearslong pursuit of an investment vehicle known as an exchange traded fund tied to the price of Bitcoin. Since the fall, crypto enthusiasts have counted down the days until a Jan. 10 deadline for the S.E.C. to decide whether to allow a Bitcoin E.T.F. Bitcoin’s price has surged more than 60 percent in recent months, driven by the rising optimism that an approval was imminent.

An announcement was widely expected this week, with major financial firms like BlackRock and Fidelity poised to launch the Bitcoin products. On social media, speculation has raged about the exact timing of an approval, inspiring memes about once-obscure S.E.C. procedures and propelling E.T.F. analysts to online stardom.

But the industry will have to wait.

“The S.E.C. has not approved the listing and trading of spot bitcoin exchange-traded products,” Mr. Gensler wrote in his post.

An E.T.F. is a basket of assets, with shares trading on traditional exchanges like the Nasdaq. Investors in a Bitcoin E.T.F. would own part of a basket containing Bitcoin, sparing them some of the risks and inconveniences associated with buying cryptocurrencies directly.

Crypto enthusiasts have long hoped that the financial product’s approval would draw billions of dollars of new investment to the industry, attracting wealth managers who in the past had hesitated to put client money into crypto.

For years, the S.E.C. resisted the industry’s entreaties, arguing that the crypto market was ripe for manipulation. But in August, the agency lost a legal battle with one of the companies hoping to offer the Bitcoin fund, paving the way for its approval.

That legal win was a rare bright spot in a bleak period for the crypto industry. Since mid-2022, crypto prices have collapsed, and several major firms have filed for bankruptcy, leading to criminal prosecutions. Mr. Gensler has led the charge against the industry, bringing lawsuits against prominent companies like Coinbase and its largest international rival, Binance.

So the crypto industry was primed to celebrate when the social media post was published on the S.E.C.’s official X account late Tuesday afternoon. A short statement appeared above a thumbnail image of Mr. Gensler.

“Today the S.E.C. grants approval for Bitcoin E.T.F.s for listing on all registered national securities exchanges,” the post said. “The approved Bitcoin E.T.F.s will be subject to ongoing surveillance and compliance measures to ensure continued investor protection.”

The price of Bitcoin briefly shot up to nearly $48,000, before dropping closer to $45,000 after the S.E.C. announced the hack.