Following the collapse of crypto exchange FTX due to a liquidity crisis, several global crypto firms have conducted audits of their respective reserve records. The aim is to ensure their users that in any emergency, the exchanges can process all withdrawals without going bankrupt. Officials at the U.S. Securities and Exchange Commission (SEC) have warned crypto investors not to blindly trust crypto firms’ internal audits.
In the last days, KuCoin, binance, CryptoComand Giottus – had their Proofs-of-Reserves verified, among other things, both internally and via third-party authenticators.
In a recent interview, Paul Munter, the SEC’s Acting Chief Accountant, said not all companies share numbers from their audits and therefore should not be relied on as reliable sources.
“Investors shouldn’t put too much faith in the mere fact that a company says it has one Proof of reserves by an accounting firm. Possession of such a report is not sufficient for an investor to assess whether the company has sufficient assets to meet its liabilities.” Wall Street Journal report quoted Munter as saying.
Mazars, the accounting firm that works with crypto majors such as binance and CryptoCom, temporarily stopped all working for clients in the crypto industry on December 16th.
While the exact reason for the act has not been disclosed, Mazars has disabled exam results websites for Binance.
Law enforcement agencies in the US are following developments in the crypto industry.
For example, earlier this month, alarm was sounded against Binance’s Proof of Reserve report by John Reed Stark, the former head of the SEC of Internet Enforcement.
Binance’s Proof of Reserve report does not address the effectiveness of internal financial controls, expresses no opinion or conclusion, and does not vouch for the numbers. I worked for SEC Enforcement for over 18 years. This is how I define “red flag”. https://t.co/6oEqmArjS9
— John Reed Stark (@JohnReedStark) December 11, 2022
OKX, a Seychelles-based company Exchange of cryptocurrencies released its second proof-of-reserve report on Friday, December 23. As part of its commitment to earning the trust of as many investors as possible, the company has pledged to provide similar reports each month.
That FTX crypto exchange filed for bankruptcy last month following the arrest of its founder and CEO, Sam Bankman Friedfor fraudulent customers.
As a result, the overall rating of the crypto market acc CoinMarketCap.
