cryptointelligence.co.uk
A key United States Securities and Exchange Commission (SEC) official has cautioned investors to avoid fully trusting claims of proof-of-reserves (PoR) from global centralised crypto firms.
Paul Munter, SEC acting chief accountant, said in a Wall Street Journal interview that investors should remain “very wary of some of the claims that are being made by crypto companies.”
Munter added ongoing audits did not indicate companies were in a sound financial position, stating, “Investors should not place too much confidence in the mere fact a company says it’s got a proof-of-reserves from an audit firm.”
He continued that PoR lacked sufficient information to allow stakeholders to determine if companies held enough assets to cover liabilities.
The news comes as numerous crypto companies, including Binance, Crypto.com, and Kraken, among others, have offered to show customers their PoR data amid the ongoing FTX collapse.
The measures aim to ease fears of further bankruptcies and ensure customers of financial liquidity.
Crypto! From @SECGov Acting Chief Accountant Paul Munter. "Every time I think I've gotten my arms around the latest crypto structure, staff comes in and explains a new one to me that makes my head spin." #AICPASEC
— Nicola M. White (@nicola_m_white) December 12, 2022
The news comes after Munster voiced concerns over cryptocurrency platforms at a recent conference in the US Capitol in mid-December.
In the subsequent WSJ article, he stated that, should the SEC find additional patterns in the industry, it could escalate matters with law enforcement agencies.
Binance’s “proof of reserve” report doesn’t address effectiveness of internal financial controls, doesn’t express an opinion or assurance conclusion and doesn’t vouch for the numbers. I worked at SEC Enforcement for 18+ yrs. This is how I define “red flag. https://t.co/6oEqmArjS9
— John Reed Stark (@JohnReedStark) December 11, 2022
Earlier claims from former SEC Internet Enforcement chief John Reed Stark accused Binance of failing to address internal financial controls over its proof-of-reserves.
The news comes after three key crypto exchanges—Celsius, Three Capital Arrows, and FTX—have filed for administration in their respective markets over severe liquidity crunches triggering bank runs, among other problems.