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A senior official from the United States Securities and Exchange Commission has warned investors to be \u201cvery wary\u201d about relying on a crypto company\u2019s \u201cproof-of-reserves.\u201d<\/p>\n
\u201cWe\u2019re warning investors to be very wary of some of the claims that are being made by crypto companies,\u201d said<\/a> SEC\u2019s acting chief accountant Paul Munter in a Dec. 22 interview with The Wall Street Journal. <\/p>\n A number of crypto firms have commissioned proof-of-reserves audits since the collapse of crypto exchange FTX, aiming to quell concerns over their own exchange\u2019s financial soundness. <\/p>\n However, Munter said the results of these audits isn\u2019t necessarily an indicator that the company is in a good financial position:<\/p>\n \u201cInvestors should not place too much confidence in the mere fact a company says it\u2019s got a proof-of-reserves from an audit firm.\u201d<\/p><\/blockquote>\n He further added that these proof-of-reserve reports \u201clack\u201d the sufficient information for stakeholders to determine whether the company has enough assets to meet its liabilities. <\/p>\n Munter also recently spoke at the Association of International Certified Professional Accountants Conference in Washington, D.C. on Dec.12, where he reportedly expressed<\/a> frustration about the constantly evolving structure of crypto firms. <\/p>\n Munter noted to WSJ that if the SEC uncovers \u201ctroublesome\u201d fact patterns, it may refer the matter to the division of enforcement for further review.<\/p>\n Related:<\/em><\/strong> Proof-of-reserves: Can reserve audits avoid another FTX-like moment?<\/em><\/strong><\/a><\/p>\n Earlier this month, John Reed Stark, former chief of the SEC of Internet Enforcement,\u00a0raised<\/a> a \u201cred flag\u201d on Twitter over Binance\u2019s proof-of-reserve report via Twitter on Dec. 11.<\/p>\n He said that Binance\u2019s proof-of-reserve report didn\u2019t address the effectiveness of internal financial controls, nor does it express an opinion or assurance conclusion, nor does it vouch for the numbers. <\/p>\n It was revealed on Dec. 16 that French auditing firm Mazars Group, discontinued its section on its website dedicated to crypto audits<\/a>.<\/p>\n The firm had worked with several prominent crypto exchanges including Binance, KuCoin and Crypto.com.<\/p>\n Ben Sharon, co-founder of digital asset management firm Illumishare SRG previously told Cointelegraph on Nov. 19 that a\u00a0proof-of-reserve audit is still a viable step<\/a> to review the financial health of crypto exchanges, but it\u2019s not enough by itself.<\/p>\n Investors have lost millions over the past twelve months with major crypto firms going bankrupt including Three Capital Arrows, Celsius and most recently cryptocurrency exchange FTX.<\/a><\/p>\n<\/div>\n