Yesterday afternoon’s dramatic cybersecurity breach has all the crucial ingredients for Money Stuff — irony, intrigue and the humiliation of Gary Gensler.
Wall Street’s main regulator went after all the big, bad crypto wolves for their poor security practices only to have his own institution get compromised because, apparently, it didn’t use 2-factor….
If you wanted to be featured in Matt Levine’s newsletter Money Stuff, there’s a few things you could do. You could, say, be the world’s richest person. Or you could insider trade while drunk on the squash court — or eavesdrop on your spouse. Or you could ask Masa Son to invest $10 billion in your company, then use it as kindling to light the whole edifice on fire. But none of that is anonymous. And all of it is messy, legally speaking. The entire world will know you’re a person of low intelligence or even lower morals, including Matt Levine — your favorite literary figure on earth, whom you venerate as a financial saint.
So what can you do that doesn’t involve insider trading or securities fraud or guitar-shaped living rooms? How about, I dunno, hacking the SEC’s Twitter account and sending a fake post claiming the agency had approved a spot-Bitcoin exchange-traded fund that it was expected to approve the next day? That seems like a pretty surefire way to get Matt’s attention!
Yesterday afternoon’s dramatic cybersecurity breach has all the crucial ingredients for Money Stuff — irony, intrigue and the humiliation of Gary Gensler. Wall Street’s main regulator went after all the big, bad crypto wolves for their poor security practices only to have his own institution get compromised because, apparently, it didn’t use 2-factor authentication! That’s EXTREMELY humiliating. And exactly the kind of thing Matt’s gonna be all over — duh, duh, duh. He writes:
I have suggested before that there are two possible reasons to issue fake announcements that move asset prices:
Market manipulation: You buy the asset, you issue the fake announcement, the price moves, you sell it at a profit; or
General trolling and hijinks: You don’t buy the asset, you issue the fake announcement, the price moves, you have a laugh and high-five your online friends.
But he’s missing a bullet! Which is, in my mind, the most obvious:
Getting Matt Levine’s attention: You don’t buy the asset, you issue the fake announcement, the price moves, you have a laugh and high-five your online friends because you were featured in Money Stuff the next day.
“The whole thing works better as trolling than as market manipulation,” he argues. “Having the SEC (1) announce that Bitcoin ETFS are approved, (2) walk back that announcement, and then (3) announce it again, for real this time, the next day, really is quite embarrassing. Like if the hacker made the SEC say something outlandish and false, that would be a little funny. But making the SEC say something true a day early is extremely funny.” The only thing that would make it funnier is if Elon Musk was the crypto enthusiast who tweeted the fake announcement to troll the SEC, an institution he despises with a passion. “The likelihood of that is close to zero,” Matt writes. “But it would be the absolute funniest Money Stuff story of all time.”
Does the SEC have a shot at somehow coming out of this saga on top? Matt says they could have, if Gary Gensler executed “a great counter-troll” by rejecting all the Bitcoin ETF applications on the basis that the crypto market is still too vulnerable to manipulation, as evidenced by the hacked Twitter account. But that didn’t happen: A little after 4 p.m. in New York, the SEC approved 11 exchange-traded funds that invest directly in Bitcoin, mostly because a court forced its hand.
So what happens next? Although the speculative buildup ahead of the announcement sent crypto prices soaring, Lionel Laurent says “the promise of game-changing, gold-like adoption looks like a meme too far.” The Winklevoss twins would love for you to believe that the introduction of a Bitcoin ETF means it’s Gold 2.0, but Bitcoin’s path ahead “looks neither straight nor shiny,” he writes. Read the whole thing (for free).