SEC Warns Cryptocurrency Investors Against Blindly Trusting ‘Proof of Reserves’ Audits

Several global cryptocurrency firms have had their respective proofs of reserves audited after the FTX cryptocurrency exchange collapsed due to a liquidity crunch. The aim is to ensure their users that in case of any emergency, the exchange will be able to process all withdrawals without going bankrupt. Officials from the U.S. Securities and Exchange Commission (SEC) have warned crypto investors that they cannot blindly trust crypto companies’ internal audits.

The last few days, KuCoin, Binance, encrypted communicationwith Chotus – In other exchanges, their proof of reserves is verified internally as well as by third-party validators.

In a recent interview, the SEC’s acting chief accountant, Paul Munter, said not all companies make their audit data public, so it should not be considered a reliable source.

“Investors should not just believe a company that claims it has Proof of reserves From an audit firm.Having such a report is not enough for investors to assess whether the company has enough assets to cover its liabilities,” one Wall Street Journal reports To quote Monte.

Mazars, an audit firm that works with crypto professionals such as Binance with encrypted communication, stop for a while All work on Dec. 16 for clients in the crypto industry.

Although no specific reason for the behavior was revealed, Mazars The web page showing the results of the Binance audit was indeed deactivated.

U.S. law enforcement is closely monitoring developments encryption industry.

For example, earlier this month, John Reed Stark, the former head of Internet enforcement at the SEC, sounded the alarm over Binance’s Proof of Reserves report.

OKX, headquartered in Seychelles cryptocurrency exchange The second Proof of Reserves report was released on Friday, December 23. As part of its commitment to gain the trust of as many investors as possible, the company has pledged to produce similar reports every month.

this FTX cryptocurrency exchange filed for bankruptcy last month, and its founder and CEO were subsequently arrested, Sam Bankman FreedUsed to defraud customers.

Ex post, overall valuation crypto market according to coin market cap.

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