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Crypto Investors Beware: Proof of Reserve Audits Prove Nothing, SEC Warns – BNB (BNB/USD), FTX Token (FTT/USD)

Cryptocurrency firms have released audits, or so-called proof of reserve reports, to gain investor confidence on the heels of the collapse of FTX.

But the US Securities and Exchange Commission (SEC) says investors should take these reports with a grain of salt.

“Investors should not place too much faith in the mere fact that a company claims to have obtained proof of reserves from an auditing firm,” Paul Munterthe acting chief accountant of the SEC, Told the Wall Street Journal.

See also: FTX Challenges Ownership of $450 Million in Robinhood Stock, Seeks Resolution in U.S. Bankruptcy Court

Once FTX FTT/USD went bankruptcycryptocurrency exchanges around the world declared that they would publish transparency reports to appease worried investors.

These cryptographic data structures, called Merkle tree proof-of-reserves, allow clients to verify the stability of their holdings on exchanges while maintaining confidentiality.

Munter says audit firms and investors should report troublesome “patterns of fact” to the SEC if they are discovered.

Binance BNB/USDthe largest cryptocurrency exchange by trading volume, recently published a report on its proof of reserves, but later pulled it after the auditing firm it hired, Mazars, announced that he would no longer work with crypto companies.

Once Mazars quit, Binance decided to hire another audit firm. So far, the “big four” audit firms — Deloitte, EY, KPMG, and PwC — have been “unwilling” to perform proof of reserves for the company, Binance claims.

Following: DeFi Hardliner resigns from SEC post after being friendly with SBF

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