WASHINGTON (MarketWatch) — The Securities and Exchange Commission may have destroyed documents and compromised enforcement cases involving activity at large banks and hedge funds during the height of the financial crisis in 2008, according to allegations made by a lawmaker on Wednesday.

“From what I’ve seen, it looks as if the SEC might have sanctioned some level of case-related document destruction,” said Sen. Chuck Grassley, Republican of Iowa, in a letter to the agency’s chairman, Mary Schapiro.

Sen. Chuck Grassley

“It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what timeframe, and to what extent its actions were consistent with the law.”

Agency staff “destroyed over 9,000 files” related to preliminary agency investigations, according to a letter sent in July to Grassley, the top Republican on the Senate Judiciary Committee, and obtained by MarketWatch.

The allegations were made by SEC enforcement attorney, Darcy Flynn, in a letter to Grassley. Flynn is a current employee, and according to the letter, received a bonus for his past year’s work.

Flynn alleges the SEC destroyed files related to matters being examined in important cases such as Bernard Madoff and a $50 billion Ponzi scheme he operated as well as an investigation involving Goldman Sachs Group Inc. GS, +2.12% trading in American International Group credit-default swaps in 2009.

Flynn also alleged that the agency destroyed documents and information collected for preliminary investigations at Wells Fargo & Co. WFC, +1.07% , Bank of America Corp. BAC, +1.34% , Citigroup C, +1.62% , Credit Suisse CS, +1.42% , Deutsche Bank DB, +1.57% Morgan Stanley MS, +2.35% and the now-bankrupt Lehman Brothers.

The letter goes into particular detail about Deutsche Bank, the former employer of current SEC enforcement chief Robert Khuzami as well as former enforcement chiefs Gary Lynch and Richard Walker.

The allegations that the SEC destroyed documents were first reported by the Rolling Stone magazine in a report Wednesday.

An SEC spokesman did not return a request for comment. However, according to the Rolling Stone article, the SEC told the National Archives and Records Administration that the commission “is not aware of any specific instances of the destruction of records from any other MUI.”

The SEC added that it “cannot say with certainty that no such documents have been destroyed over the past 17 years.” Read Grassley's letter to the SEC

Flynn’s lawyer, Gary Aguirre, was a former SEC attorney. Aguirre was fired in September 2005 as he was investigating allegations of insider trading at the major hedge fund Pequot Capital Management.

At the time, the SEC said Aguirre had personality conflicts with other staff attorneys, was reticent to be supervised and did not follow the agency’s chain of command.

However, the SEC in 2010 agreed to pay $755,000 to Aguirre as a settlement of a wrongful termination suit he filed, and two Senate committees disagreed with the agency’s stance in a 2007 report.