On January 9, chaos erupted in the cryptocurrency market as a false announcement regarding the approval of spot Bitcoin exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC).

 The tweet claimed the regulator had approved spot Bitcoin ETFs, marking a historic moment for the cryptocurrency market. However, approximately 15 minutes later, SEC Chair Gary Gensler clarified that the commission had not granted approval for the listing and trading of spot Bitcoin exchange-traded products.

The SEC quickly pulled the tweet, which had already garnered millions of views. The official statement read, 

"The SEC’s @SECGov X account has been compromised. The unauthorized tweet regarding Bitcoin ETFs was not made by the SEC or its staff."

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The Security Breach Unveiled

The subsequent investigation into the security breach revealed a shocking lapse in the SEC's cybersecurity practices. 

The X (formerly Twitter) safety team disclosed that the SEC's account fell victim to a SIM swap hack, a form of identity theft where an attacker takes control of the victim's phone number. 

This breach allowed the hacker to gain access to the SEC's official X page. Notably, the SEC's account did not have two-factor authentication enabled at the time, exposing a critical vulnerability.

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Theories and Speculations

Various theories emerged regarding the nature of the incident as the cryptocurrency community grappled with its aftermath.

Some, including Blockchain sleuth ZachXBT, suggested that the SEC was likely hacked, but there was speculation that the initial tweet announcing the Bitcoin ETF approval might have been legitimate. 

Others, such as VanEck advisor Gabor Gurbacs, raised suspicions about the coordinated response from the SEC and Gensler, hinting at the possibility of an inside job to manipulate the market.

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Market Impact and Regulatory Response

The false tweet led to significant market volatility, causing nearly $90 million worth of Bitcoin long and short positions to be liquidated. 

Bitcoin's price briefly surged to over $48,000 before retracing to nearly $45,000. Some analysts argue that the SEC may have violated market manipulation laws, and Senator Bill Hagerty is demanding answers from the regulatory body.

Senators J.D. Vance and Thom Tillis have called on the SEC to provide Congress with a report on the breach, expressing serious concerns about the commission's internal cybersecurity procedures. The letter, dated January 9, sets a deadline for January 23 and references a recently finalized rulemaking on cybersecurity disclosures. 

This call for transparency joins a growing chorus of voices demanding an official investigation into the incident, as lawmakers question the SEC's ability to protect investors and maintain the integrity of financial markets.