Last month, the DOJ targeted several major Wall Street firms for their increasing use of encrypted messaging apps like Signal, Telegram, and WhatsApp. Seventeen firms, including JP Morgan Chase, settled with the SEC for a total of $1.8 billion over the unauthorized practice, which the agency believes greatly hinders accountability for individual employees and the companies at large. "A lot of employees are more careful and are using Signal or other encrypted systems, and that poses a real challenge to what DOJ is trying to do on increased corporate enforcement and individual employees," Justin Weitz, formerly of the DOJ and now with Morgan Lewis, told Bloomberg Law. "But it is also a challenge for companies that are working to ensure a clean corporate culture."

• Such practices could mean firms "suffer litigation setbacks if they’re unable to fully satisfy discovery demands for internal communications," Bloomberg Law adds. "A defense against certain allegations might suffer if a corporate defendant can’t access relevant messages."

• Ian McGinley, a former assistant US attorney for the Southern District, said "We’ve seen it with banks, but every single company has this issue." He believes enforcement can't rely on policies alone, anymore. "We’re heading towards a regime where you need a technological solution or at least have tried one."

JP Morgan's Addiction

In December, the SEC went after JP Morgan, seeming to make an example of the banking giant's executives. According to Bloomberg Law, federal regulators said executives should have been enforcing private communication rules rather than using WhatsApp so pervasively themselves. The SEC found that, between 2018 and 2019 alone, senior executives sent and "received more than 21,000 messages on their personal devices" which "reflect extensive discussions" among the ranks. Sanjay Wadhwa, the SEC's deputy director of enforcement, said "JPMorgan’s failures hindered several commission investigations and required the staff to take additional steps that should not have been necessary." As a result, the firm settled for $200 million. 

The Verdict

The DOJ and SEC have an uphill battle to wage when it comes to regulating new technology. That being said, Wall Street banks may be shooting themselves in the foot for future court cases when it comes to their usage of disappearing messages and potential spoiling of evidence.