SEC steps up investigation into auditors serving crypto-currency exchanges

According to Paul Munter, acting chief accountant at the Securities and Exchange Commission, the U.S. regulator is keeping a closer eye on proof of reserves (POR). “We caution investors to be very wary of some of the claims made by crypto-currency companies“, Paul Munter explained to the Wall Street Journal (WSJ) on December 22.

SEC official warns investors to be wary of reserve proof audits and crypto-currency trading claims.

U.S. regulators, specifically the Securities and Exchange Commission (SEC), are taking a closer look at proof of reserves (POR) these days in the wake of the FTX collapse. Speaking with the WSJ on Thursday, the SEC’s acting chief accountant Paul Munter explained that investors should not place much faith in the audits and statements of ROP companies. The SEC is concerned that investors “May be falsely reassured by company reports“, the WSJ report explains.

“We warn investors to be very wary of some of the claims made by crypto-currency companies“, explained Paul Munter. “Investors should not place too much faith in the mere fact that a company says it has obtained proof of reserves from an audit firm“, the SEC accountant stressed.

Paul Munter’s comment comes on the heels of the ROP concept gaining traction among crypto-currency exchanges since the FTX collapse. Companies like Okx, Binance, Crypto.com, Huobi and others have published POR audits, but some have been controversial. Also the accounting firm Mazars Group after it revealed that it would no longer provide crypto-currency audits. The ROP audit of Binance conducted by Mazars has also been removed from the web.

“We are improving our understanding of what is happening in the market“, Paul Munter told the WSJ. “If we find fact patterns that we find troublesome, we will consider a referral to the law enforcement division.“

Also, after Mazars Group said it would not offer POR audits to crypto-currency exchanges, a spokesperson for audit firm BDO said: this week that it was considering what types of clients it might accept. Jeffrey Johanns, a professor at the University of Texas, believes that auditing firms are doing well to be reluctant to offer auditing services to crypto companies. “The Big Four firms have rightly decided that the risks are extremely high“, Jeffrey Johanns told the WSJ.