Be ‘very wary’ of crypto proof-of-reserve audits: SEC official

A elder authoritative from the United States Securities and Exchange Commission has warned investors to beryllium “very wary” astir relying connected a crypto company’s “proof-of-reserves.”

“We’re informing investors to beryllium precise wary of immoderate of the claims that are being made by crypto companies,” said SEC’s acting main accountant Paul Munter successful a Dec. 22 interrogation with The Wall Street Journal.

A fig of crypto firms person commissioned “proof-of-reserves” audits since the illness of crypto speech FTX, aiming to quell concerns implicit their ain exchange’s fiscal soundness.

However, Munter said the results of these audits isn’t needfully an indicator that the institution is successful a bully fiscal position.

“Investors should not spot excessively overmuch assurance successful the specified information a institution says it’s got a proof-of-reserves from an audit firm.”

He further added that these proof-of-reserve reports “lack” the capable accusation for stakeholders to find whether the institution has capable assets to conscionable its liabilities.

Munter besides precocious spoke astatine the Association of International Certified Professional Accountants Conference successful Washington, D.C connected Dec.12, wherever helium reportedly expressed vexation astir the perpetually evolving operation of crypto firms.

Munter noted to WSJ that if the SEC uncovers “troublesome” information patterns, it whitethorn notation the substance to the part of enforcement for further review.

Related: Proof-of-reserves: Can reserve audits debar different FTX-like moment?

Earlier this month, John Reed Stark, erstwhile main of the SEC of Internet Enforcement raised a “red flag” connected Twitter implicit Binance’s proof-of-reserve study via Twitter connected Dec. 11.

He said that Binance’s impervious of reserve study didn’t code the effectiveness of interior fiscal controls, nor does it explicit an sentiment oregon assurance decision nor does it vouch for the numbers.

It was revealed connected Dec. 16 that French auditing steadfast Mazars Group, discontinued its conception connected its website dedicated to crypto audits.

The steadfast had worked with respective salient crypto exchanges including Binance, KuCoin and Crypto.com

Ben Sharon, co-founder of integer plus absorption steadfast Illumishare SRG antecedently told Cointelegraph connected Nov. 19 that a proof-of-reserve audit is inactive a viable step to reappraisal the fiscal wellness of crypto exchanges, but it’s not capable by itself.

Investors person mislaid millions implicit the past 12 months with large crypto firms going bankrupt including Three Capital Arrows, Celsius and astir recently cryptocurrency speech FTX.