By Joe Light
The Federal Bureau of Investigation on Thursday arrested a 25-year-old Alabama man who allegedly helped take over the Securities and Exchange Commission's X account, a hack that was a major black eye for the agency and helped lead to a temporary spike in Bitcoin prices.
In January, the SEC's X account posted that the agency had approved the first spot Bitcoin exchange-traded funds. Minutes later, SEC officials said their account had been hacked and no such decision had been made. The agency did approve the products the next day.
Crypto investors believed the approval of these ETFs would launch a new market that would eventually reach tens of billions of dollars. And that is precisely what has happened since then.
The indictment alleges that Eric Council Jr. of Athens, Ala., used a fake identification at a mobile phone store to perform a "SIM swap" that allowed him to take over the phone number of someone with control of the SEC's X account. He and other conspirators, which the indictment didn't name, were then able to use the number to get access to the account and make the false post.
An attorney representing Council didn't immediately respond to a request for comment.
"This criminal indictment demonstrates our commitment to holding bad actors accountable for undermining the integrity of the financial markets," said SEC inspector general Deborah Jeffrey in a statement.
January's hack was a major black eye for the SEC. For years, the agency had denied rule changes that would allow Bitcoin ETFs to trade, citing inadequate monitoring for manipulation in crypto markets among other factors. In August 2023, a federal court ruled that the SEC erred in denying those applications.
In January, the SEC faced a deadline to approve the ETFs or to deny them on different grounds. and the price of Bitcoin rose sharply in anticipation that the funds would finally come to market, giving financial advisors and institutional investors an easy way to buy the tokens.
The Justice Department said that Bitcoin's price rose $1,000 after the false post, which came the day before the expected deadline. The agency regained control of its account and denied the post, helping to lead Bitcoin's price to fall by a couple thousand dollars. The next day, the commission did approve the rule change and the funds came to market.
Thursday's indictment likely won't be the end of the investigation into the hack. Council helped gain access to the SEC's account, but other co-conspirators wrote and submitted the false post.
Council was expected to make his first appearance in federal court in Alabama on Thursday.
Write to Joe Light at joe.light@barrons.com
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(END) Dow Jones Newswires
October 17, 2024 15:50 ET (19:50 GMT)
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