The U.S Security and Exchange Commission’s senior official, Paul Munter, has warned crypto investors to be “very wary” before relying on a crypto company’s “proof-of-reserve.”

The SEC’s acting chief accountant, Munter, said, “We’re warning investors to be very wary of some of the claims that are being made by crypto companies. Investors should not place too much confidence in the mere fact a company says it’s got a proof-of-reserves from an audit firm.”

Since the fall down of the major crypto firm FTX, various crypto exchange and trade firms have commissioned proof-of-reserve audits with the objective of putting an end to the suspicions over their own firm’s financial stability.

On Dec 11, SEC’s former chief of Internet Enforcement, John Reed Stark, shared a post on Twitter about raising a “red flag” over Binance’s proof-of-reserve report.

On the other hand, Paul Munter suggested that such kinds of audits are not the correct basis to judge an organization to be in good shape. 

He said, “Investors should not place too much confidence in the mere fact a company says it’s got a proof-of-reserves from an audit firm.”

The proof-of-reserve reports are insufficient as they “lack” information for the stakeholders.

Munter also shared that the Security and Exchange Commission is also scrutinizing the financial reports of crypto firms more closely. He commented, “We are increasing our understanding of what’s going on in the marketplace. “If we find fact patterns that we think are troublesome, we will consider a referral to the division of enforcement.”

On Dec 12, at the Association of International Certified Professional Accountants Conference in Washington, D.C., Munter also expressed the frustration around the crypto firms and their evolving nature.

Munter also informed that in case if SEC reveals “troublesome” facts and data patterns, the commission will further review the matter with the division of enforcement.

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