SEC official warns crypto investors to be “extremely careful” of proof-of-reserve audits
The acting chief accountant of the SEC, Paul Munter advised investors not to put too much faith in a corporation that is delaying a proof-of-reserves audit.
A top official from the United States Securities and Exchange Commission has cautioned investors against relying on “proof-of-reserves” from a cryptocurrency corporation.
Paul Munter, the SEC’s acting top accountant, said in an interview with The Wall Street Journal on December 22 that investors should be sceptical of some statements made by cryptocurrency businesses.
Since the collapse of crypto exchange FTX, a number of crypto enterprises have commissioned proof-of-reserves audits in an effort to allay worries over their own exchange’s financial stability.
Munter said that the outcomes of these audits are not always indicative of the company’s financial health. “Investors should not place too much faith in a company’s claim that it has a proof-of-reserves from an auditing firm.”
He continued by stating that these proof-of-reserve filings “without” the information necessary for stakeholders to decide if the corporation has enough assets to cover its obligations.
Munter also recently delivered a speech at the Association of International Certified Professional Accountants Conference on December 12 in Washington, D.C., where he allegedly voiced displeasure about the ever-changing structure of crypto businesses.
Munter told WSJ that if the SEC identifies “troubling” fact patterns, it may send the subject to the enforcement division for additional consideration.
Earlier this month, former SEC head of Internet Enforcement John Reed Stark raised a “red flag” on Twitter over Binance’s December 11 proof-of-reserve report.
According to him, Binance’s proof-of-reserve report does not examine the efficacy of internal financial controls, provide an opinion or assurance conclusion, or attest to the statistics.
The French auditing company Mazars Group deleted the part of its website devoted to crypto audits on December 16.
The company has collaborated with notable cryptocurrency exchanges like Binance, Kucoin, and Crypto.com.
Ben Sharon, a co-founder of the digital asset management business Illumishare SRG, previously told Cointelegraph on November 19 that a proof-of-reserve audit is still a feasible method for assessing the financial health of cryptocurrency exchanges, but it is not sufficient on its own.
In the previous twelve months, investors have lost millions due to the failure of prominent crypto enterprises, including Three Capital Arrows, Celsius, and most recently the cryptocurrency exchange FTX.
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