SEC Faces Market Manipulation Probe After Hacked Tweet on Bitcoin ETFs

SEC banner with gavel plus a Twitter icon and a hacker in hood

The SEC will have to investigate itself for possible market manipulation after its X account was hacked and posted a false announcement that it had approved spot bitcoin ETFs. The crypto market reacted with volatility to the fake news and the subsequent denial by the SEC chair. The regulator is expected to make a decision on the first batch of spot bitcoin ETF applications by Wednesday.

An Unauthorized Tweet

The U.S. Securities and Exchange Commission (SEC) may have to probe itself for potential market manipulation after its X account was compromised and posted an unauthorized tweet that claimed it had approved the first spot bitcoin exchange-traded funds (ETFs).

The tweet, which was quickly deleted, was posted on Tuesday afternoon and caused a stir in the crypto market, as many investors and media outlets took it as a sign that the SEC had finally given the green light to the highly anticipated spot bitcoin ETFs, which would track the current price of the cryptocurrency rather than futures contracts.

A Hacked Twitter Account

The price of bitcoin spiked to as high as $47,897 following the tweet, before plunging to as low as $44,903 after the SEC chair Gary Gensler refuted the fake news and said that the SEC’s X account was hacked and that no spot bitcoin ETFs had been approved.

The SEC spokesperson confirmed that the X account was compromised and that the unauthorized tweet was not made by the SEC or its staff. The spokesperson also said that the agency was working to secure the account and prevent further incidents.

Market Manipulation?

However, the damage may have already been done, as the hacked tweet could have influenced the trading behavior and decisions of many crypto investors and traders, who may have bought or sold bitcoin based on the false information.

According to Charles Gasparino, a senior correspondent at Fox Business Network, securities lawyers said that the SEC will have to investigate itself for possible market manipulation, as the hacked tweet could have moved the price of bitcoin up and down and affected the value of other crypto-related assets and products. In a tweet on Tuesday, Gasparino wrote:

“BREAKING: Securities lawyers tell @FoxBusiness the @SECGov will have to investigate itself for market manipulation after moving the price of $BTC up and down following the hacked tweet that it had approved the first spot BTC ETF and then saying it was fake. That said, for the SEC not to approve tomorrow would be unprecedented; it has never rejected ETF applications that have gone as far as these.”

A Clear Case of Manipulation

The SEC has the authority and responsibility to protect investors and markets from fraud and manipulation, and to enforce the federal securities laws. The SEC also has the power to sanction or sue individuals or entities that engage in market manipulation or disseminate false or misleading information.

The SEC is expected to make a decision on the first batch of applications for spot bitcoin ETFs by Wednesday, as it faces a deadline to approve or reject the proposals from Valkyrie Investments, VanEck, and WisdomTree. The SEC could also delay the decision, as it has done with previous applications.

Cautious About Spot ETF for Bitcoin

The crypto industry and investors are hopeful that the SEC will approve the spot bitcoin ETFs, as they could provide a more accessible and regulated way to invest in the digital asset, without the hassle and risk of buying and storing bitcoins directly.

However, the SEC has been cautious and skeptical about spot bitcoin ETFs, citing concerns about market manipulation, custody, and investor protection. The SEC has already approved several bitcoin futures ETFs, which began trading in October 2021 and have attracted billions of dollars in inflows. However, some analysts and investors argue that futures ETFs are less efficient and more costly than spot ETFs, as they involve paying fees and premiums to roll over the contracts.

More Pressure on The SEC

Spot bitcoin ETFs, on the other hand, would invest directly in bitcoins as the underlying asset, and would aim to mirror the price of the cryptocurrency in the spot market. Spot bitcoin ETFs would also require a secure and reliable custody solution, which registered custodians would manage.

The hacked tweet incident could add more uncertainty and pressure to the SEC’s decision-making process, as it could raise more questions about the security and integrity of the crypto market and the information sources that investors rely on.

Author: Grace

Grace likes gardening. She holds some BTC and ETH.