The United States Securities and Exchange Commission (SEC) has revealed it is looking deeper into the financial statements of crypto firms because the agency is concerned that investors may be relying on information that may be false.
Paul Munter, Acting Chief Accountant to the U.S. SEC stated in a Wall Street Journal (WSJ) report that the commission is warning investors to be careful about the claims that are being made by crypto firms in their audited reports. He advised investors not to fully rely on the information of those audit reports because they may not be comprehensive enough to give the actual state of the firm’s financial position.
He emphasized that the SEC is expanding its understanding of transactions in the cryptocurrency market and that any potential gray areas will be discovered and forwarded to the relevant law enforcement agencies.
The appointment of Mazars’ accounting firm to conduct a verification audit of Binance’s reserves may have prompted SEC to issue the announcement. The verification of proof-of-reserves is an effort by crypto firms to restore investor confidence following the fallout from the FTX exchange, which has left the crypto market in doubt.
The process is intended to provide investors with confidence that their tokens are covered by reserves and their funds are secure, but the reports are not as comprehensive as an audited financial statement.
SEC Faces Scrutiny Following FTX Collapse
The SEC is responsible for enforcing federal securities laws and regulations, which are designed to protect investors and ensure the integrity of the securities markets.
The federal agency faced criticism from key stakeholders in the crypto industry for failing to carry out its responsibilities, which invariably resulted in customers’ funds being lost in the insolvent FTX Exchange.
Congressman Pete Sessions stated in a report that the Securities and Exchange Commission was asleep at the helm of affairs that led to the collapse of the FTX exchange. He also questioned how FTX Group and its subsidiaries met the criteria for financial and corporate control.
While the SEC has been criticized for not discharging its duties in the case of the FTX exchange, Thailand’s SEC has pledged its commitment to the industry by announcing that it would protect investors through stricter laws.
In a similar situation, the Australian SEC recently announced that it was suing Finder Wallet Pty Ltd over violation of financial regulations.
