SEC Official Warns Accounting Firms on Crypto Company Statements
A senior official from the Securities and Exchange Commission (SEC) has cautioned accounting firms about their potential legal liability for statements made by crypto companies. The warning comes in the wake of scandals and insolvencies in the crypto industry, particularly among crypto asset trading platforms. Some platforms have marketed their retention of third parties, including accounting firms, to perform reviews of certain aspects of their business, often presented as audits.
- SEC Chief Accountant Paul Munter issued the warning, emphasizing the renewed focus on accounting firms.
- Crypto trading platform Binance faced public criticism for a partial review of its books by accounting firm Mazars.
- FTX’s collapse also raised concerns about insufficient reserves, prompting Mazars to pull the partial financial report.
- The SEC’s recent enforcement filings allege that Binance US did not have enough assets to cover customer redemptions.
- Accounting firms could be legally liable under antifraud laws if their clients mislead about the extent of a financial review or the “scope of work”.
Hot Take: The SEC’s warning highlights the potential legal consequences for accounting firms in the crypto industry. While some argue for more transparency, others believe caution is necessary to prevent misleading statements.
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