SEC steps up investigation of auditors serving cryptocurrency exchanges

According to Paul Munter, acting chief accounting officer of the Securities and Exchange Commission, the US regulator is keeping a close eye on evidence of reserves (POR). “We caution investors to be very wary of some of the claims made by cryptocurrency companies“, Paul Munter explained to the Wall Street Journal (WSJ) on December 22.

SEC officer warns investors to beware proof of reserve audits and cryptocurrency exchange claims.

US regulators, and specifically the Securities and Exchange Commission (SEC), are taking a closer look at proof of reserves (POR) these days following the collapse of FTX. Speaking to the WSJ on Thursday, SEC Acting Chief Accounting Officer Paul Munter explained that investors should not place too much faith in the audits and filings of POR companies. The SEC is concerned that investors “may be falsely reassured by the companies’ reports“, explains the WSJ report.

We caution investors to be very wary of some of the claims made by cryptocurrency companies“, explained Paul Munter. “Investors should not place too much faith in a company’s claim to have obtained proof of reserves from an accounting firm.“, emphasized the SEC auditor.

Paul Munter’s comment follows the concept of ROP gaining traction among cryptocurrency exchanges since the collapse of FTX. Companies such as Okx, Binance, Crypto.com, Huobi and others have published ROP revisions, but some have sparked controversy. Plus accountancy firm Mazars Group after it revealed it would no longer provide cryptocurrency audits. Binance’s ROP audit conducted by Mazars has also been pulled from the web.

We improve our understanding of what is happening in the market“, Paul Munter told the WSJ. “If we find patterns of facts that we find troubling, we will consider a referral to the Law Enforcement Division.

Additionally, after Mazars Group said it would not offer ROP audits to cryptocurrency exchanges, a spokesperson for audit firm BDO said: This week it was considering what types of clients it could accept. Jeffrey Johanns, a professor at the University of Texas, believes that accounting firms are wise to be reluctant to offer auditing services to crypto companies. “The big four companies have rightly decided that the risks are extremely high“, Jeffrey Johanns told the WSJ.

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