Paul Munter, Acting Chief Accountant of the U.S. Securities Exchange Commission, has expressed concern over the veracity of companies’ Proof of Reserves (POR) audits. Speaking to the Wall Street Journal on Dec. 22, he cautioned investors to be wary of the claims made by cryptocurrency firms.
SEC Official Warns Investors to Be Cautious with Crypto Exchange Claims and Proof-of-Reserve Audits
The U.S. Securities and Exchange Commission (SEC), in the wake of the FTX collapse, is taking a closer look at Proof of Reserves (POR) audits. In an interview with the Wall Street Journal on Thursday, Paul Munter, the agency’s Acting Chief Accountant, warned investors that POR audits should not necessarily be trusted. He also voiced concern that investors could be misled and harmed by companies’ claims.
“We caution investors to be very careful with some of the claims that cryptocurrency companies make,” said Munter. “Investors should not place too much trust in the mere fact that a company says it has proof of reserves from an auditing firm,” the SEC accountant continued.
It is important that investors know enough information to evaluate whether the company has sufficient assets in order to cover its liabilities.
Munter’s comments follow a surge in POR audits by crypto exchanges, with companies like OKEx, Binance, Crypto.com and Huobi publishing reports. On Dec. 16, Bitcoin.com News reported that the accounting firm Mazars Group had announced that it would no longer provide audits of cryptocurrency exchanges. The Binance POR audit completed by Mazars has since been removed from the internet.
“We are increasing our understanding of what is happening in the market,” Munter told the WSJ. “If we find fact patterns that we believe are problematic, we will consider a referral to the compliance division.”
Despite Mazars Group announcing that it would no longer offer POR audits for crypto exchanges, BDO spokespeople said this week that the firm is reviewing which clients it will accept. University of Texas professor Jeffrey Johanns argued that audit firms can still be trusted. “The big four firms have… correctly decided the risks [of auditing crypto companies] they are extremely high,” Johanns told the WSJ.
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