Following the collapse of the FTX crypto exchange due to a liquidity crunch, several global crypto firms have conducted the audits of their respective proofs-of-reserves. The aim is to ensure their users that, under any emergency, the exchanges will be able to handle all withdrawals without going bankrupt. Officials from US’ Securities and Exchange Commission (SEC) have warned crypto investors, that they must not blindly trust the internal audits of crypto firms.
In a recent interview, Paul Munter, the acting chief accountant of the SEC said not all firms are even sharing numbers from their audits and hence, should not be taken as reliable sources.
“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. Having such a report is not enough information for an investor to assess whether the company has sufficient assets to cover its liabilities,” a Wall Street Journal report quoted Munter as saying.
While the exact reason for the deed was not revealed, Mazars did deactivate web pages showing audit findings for Binance.
The law enforcement authorities in the US are closely tracking developments in the crypto industry.
An alarm, for instance, was raised against Binance’s proof-of-reserve report earlier this month by John Reed Stark, former chief of the SEC of Internet Enforcement.
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
OKX, a Seychelles-based cryptocurrency exchange published its second proof-of-reserve report on Friday, December 23. As part of its commitment to get the trust of as many investors as possible, the company has vouched to provide similar reports every month.
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