SEC urges investors not to trust Bitcoin-exchange audits

Investors should “be very careful” about audits of cryptocurrency exchange reserves. This view was voiced by Paul Munter, the SEC’s acting Chief Accountant, in an interview with The Wall Street Journal.

According to him, the results of these audits do not necessarily prove that a company is in good financial health. Such reports “lack” important information about asset sufficiency to meet obligations.

“Investors should not place too much trust in a firm’s claims that it has passed an audit,” Munter stressed.

He warned that if “unpleasant” facts are uncovered, the SEC could refer the case to the Enforcement Division for further consideration.

Binance was among the first to disclose information about its crypto reserves. The company also launched the Proof-of-Reserves feature, which allows users to verify that their Bitcoin is backed by assets on the platform, and published Mazars’ audit report on the verification.

In the latest WSJ survey, experts saw troubling signals. In their view, the document does not answer all investor questions about the sufficiency of collateral. The Binance audit was criticized by Kraken co-founder Jesse Powell.

Mazars also published reserve report for the cryptocurrency platform Crypto.com and announced an audit of the KuCoin exchange. However, on 16 December the firm paused operations with all clients in the crypto industry.

As Bitstamp US chief Bobby Zagotta called ‘Proof-of-Reserves’ the key to restoring trust in exchanges.

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