After the collapse of FTX, U.S. regulators and specifically the Securities and Exchange Commission (SEC) are looking at proof-of reserve (POR), more closely. On Thursday, Paul Munter (SEC’s acting chief accounting) explained to the WSJ that investors shouldn’t trust POR audits or claims. The WSJ reported that the SEC is concerned investors may be getting a false sense reassurance from the reports of the firms.
Munter stated that crypto companies are making claims about investors and warned them to be cautious. The SEC accountant stated that investors should not trust just the fact that a company claims to have proof-of-reserves form an auditor firm. Munter continued:
An investor cannot assess the company’s assets and liabilities without a POR audit.
Munter’s commentary follows the POR concept that has gained popularity among crypto-exchanges since FTX collapsed. POR audits have been issued by companies like Okx and Binance as well as Crypto.com and Huobi. However, some of these audits were controversial. On December 16, Bitcoin.com News reported about Mazars Group, an accounting agency that had announced it would no longer offer crypto exchange audits. Mazars also took out Binance’s POR audit.
Munter stated to the WSJ that they are improving their understanding of the market. Munter said that if we discover fact patterns we believe are troubling, we may refer them to the division for enforcement.
A spokesperson for BDO , an auditing firm, stated that after Mazars Group had said that it wouldn’t offer POR audits to cryptocurrency exchanges, it was evaluating which customers it should take on. Jeffrey Johanns, a University of Texas professor believes that auditing firms are doing the right things by not offering crypto firms auditing services. Johanns stated that the Big Four firms had ‘rightly determined the risks [of auditing cryptocurrency companies] are extremely high’.