The Securities and Exchange Commission (SEC), Chief Accountant – Paul Munter, has posted a statement on “potential pitfalls of purported crypto assurance work. Munter states that in light of the many scandals of fraud in the cryptosphere, claims by platforms that they retain 3rd party outsiders to provide services like audits, should be taken with a grain of salt. His statement is said to be directed at accounting professionals but the commentary should be viewed as addressing the entire crypto industry as the Commission has tightened up its enforcement strategies targeting crypto firms.
Munter states:
“… an accounting firm should carefully consider the contents of any statements that it or its clients make about the scope of work performed and the nature of the procedures followed because material misstatements regarding those subjects could result in legal liability for the accounting firm. Such statements could implicate the antifraud provisions of the federal securities laws if there has been fraud “in the offer or sale” of a security…”
And;
“An accounting firm’s violation of the antifraud provisions of the federal securities laws or applicable independence requirements could result in the censure or suspension of the firm, or its accountants…”
This includes advocacy or lobbying, according to Munter.
Munter closes by stating they view accounting firms in the crypto space as paying a “vital gatekeeper role” and “no audit firm is too small, or too big, to be suspended from appearing or practicing before the Commission.”
SEC Commissioner Hester Peirce – a supporter of Fintech innovation, commented on the statement via Twitter, expressing her concern that the Commission’s position could “discourage good faith efforts.”
Crypto platforms & their accountants should be clear about what proof of reserves is and isn't & customers should understand the limitations, but why would we want to discourage good-faith efforts to provide more transparency? https://t.co/fsuxUGPrrb
— Hester Peirce (@HesterPeirce) July 27, 2023
