SEC Warns Crypto Investors
2022.12.23 01:16
SEC Warns Crypto Investors
Budrigannews.com – A senior official from the United States Securities and Exchange Commission has warned investors to be “very wary” about relying on a crypto company’s “proof-of-reserves.”
“We’re warning investors to be very wary of some of the claims that are being made by crypto companies,” said SEC’s acting chief accountant Paul Munter in a Dec. 22 interview with The Wall Street Journal.
A number of crypto firms have commissioned “proof-of-reserves” audits since the collapse of crypto exchange FTX, aiming to quell concerns over their own exchange’s financial soundness.
However, Munter said the results of these audits isn’t necessarily an indicator that the company is in a good financial position.
“Investors should not place too much confidence in the mere fact a company says it’s got a proof-of-reserves from an audit firm.”
He further added that these verification of-hold reports “miss the mark on” adequate data for partners to decide if the organization has an adequate number of resources for meet its liabilities.
Additionally, Munter spoke on December 12 at the Association of International Certified Professional Accountants Conference in Washington, D.C., where he reportedly expressed dissatisfaction with the crypto firms’ constantly shifting organizational structures.
Munter informed the WSJ that the SEC may refer the matter to the division of enforcement for further investigation if it uncovers “troubling” fact patterns.
On Twitter on Dec. 11, former SEC of Internet Enforcement chief John Reed Stark raised a “red flag” regarding Binance’s proof-of-reserve report.
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He said that the proof of reserve report for Binance didn’t talk about how well the company’s internal financial controls worked, didn’t give an opinion or guarantee, and didn’t back up the numbers.
On December 16, it was made public that the crypto audits section of the French auditing firm Mazars Group’s website had been removed.
Ben Sharon, co-founder of digital asset management firm Illumishare SRG, previously told Cointelegraph on Nov. 19 that a proof-of-reserve audit is still a viable step to review the financial health of crypto exchanges, but it is not sufficient on its own. The company had worked with several prominent crypto exchanges, including Binance, KuCoin, and Crypto.com.
Over the past year, major crypto companies like Three Capital Arrows, Celsius, and the most recent cryptocurrency exchange FTX went bankrupt, causing investors to lose millions of dollars.
