SEC Warns Accounting Firms for Crypto Audits

SEC Chief Accountant Paul Munter has warned accounting firms working with crypto clients about legal responsibilities.

The SEC (U.S. Securities and Exchange Commission) has issued a warning to accounting firms that work with crypto clients regarding their legal responsibilities. Paul Munter, the Chief Accountant of the SEC, emphasized the need for increased focus on the operations of companies in the crypto asset space, particularly those in the crypto trading platforms, following the incidents of bankruptcies in the crypto market. Munter also drew attention to the fact that accounting auditors could be held legally accountable for their clients’ misleading public statements.

Has CZ Misled the Public?

One of the recent incidents involves an accounting firm called Mazars examining the documents of the Binance exchange. As a result of this examination, it was discovered that Binance did not have sufficient reserves to back its native token, FTT. However, Binance’s owner and CEO, Changpeng ‘CZ’ Zhao, misleadingly presented this examination as “audited evidence” to deceive the public. Following this event, Mazars decided to halt its services to all crypto clients.

Persons Who Provide Aid Will Also Be Responsible

SEC Chief Accountant Munter emphasized that accounting firms could be held legally responsible if they provide misleading information about the scope of financial examinations conducted for their clients. Munter also stated that anyone knowingly or recklessly providing substantial assistance to another person in violation of the Securities Act or Exchange Act would be equally liable as the person receiving the assistance.

With the increasing scandals in the crypto industry, the SEC’s close monitoring of companies operating in the crypto space is seen as a necessary step. The recent warning published by the SEC is considered a move towards helping the crypto industry operate in a more transparent and trustworthy manner. However, it is also crucial for accounting firms to conduct their audit processes more carefully, avoiding misleading statements, and enhancing their credibility within the sector.

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