SEC Heightening Scrutiny of Auditors' Crypto Work (wsj.com) 19
The Securities and Exchange Commission is stepping up scrutiny of the work that audit firms are doing for cryptocurrency companies, concerned that investors may be getting a false sense of reassurance from the firms' reports, a senior official at the regulator said. From a report: "We're warning investors to be very wary of some of the claims that are being made by crypto companies," Paul Munter, the SEC's acting chief accountant, said in an interview. Increased scrutiny has led at least one audit firm to drop crypto clients, in some cases soon after producing reports on the companies' assets and liabilities. Crypto companies are eager to get the blessing of an auditor to reassure their skittish clients.
The Wall Street watchdog is looking closely at how crypto companies are portraying their reports from audit firms, according to Mr. Munter. Many of these companies are closely held or based offshore, and so unlikely to fall within the regulator's remit. The SEC is effectively sending a warning to audit firms, which don't want to run afoul of their regulator, as well as putting investors on alert. "We are increasing our understanding of what's going on in the marketplace," Mr. Munter said. "If we find fact patterns that we think are troublesome, we will consider a referral to the division of enforcement." The regulator is worried particularly about so-called proof-of-reserves reports, which aim to show that the crypto company has sufficient assets to cover customers' funds.
The Wall Street watchdog is looking closely at how crypto companies are portraying their reports from audit firms, according to Mr. Munter. Many of these companies are closely held or based offshore, and so unlikely to fall within the regulator's remit. The SEC is effectively sending a warning to audit firms, which don't want to run afoul of their regulator, as well as putting investors on alert. "We are increasing our understanding of what's going on in the marketplace," Mr. Munter said. "If we find fact patterns that we think are troublesome, we will consider a referral to the division of enforcement." The regulator is worried particularly about so-called proof-of-reserves reports, which aim to show that the crypto company has sufficient assets to cover customers' funds.
Please educate me (Score:4, Insightful)
Where on Earth something created out of thin air, with nothing and nobody backing it up with any actual real world monetary value, can be valued and traded in the USD millions and higher ranges. At best, this is a payment of someone else expense of time, hardware and electrical bill into some false sense of profit.
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The people peddling this crap are taking advantage of basic human biology by creating something which is scarce, collectable, and triggers that intense feeling of potentially missing out. It won't get most people, they'll see it for the scam it is, but for people with a compulsion to "collect 'em all" like they say in Pokemon it'll be an alluring siren to them.
Think of crypto like a collectable plate. You know, those kitschy things which have various nature scenes painted on them that your grandma has on
Re: Please educate me (Score:2)
The only thing wrong with your explanation is that at the end of the day I actually have a physical plate with NCC-74656 Voyager on it that I can put on my display shelf.
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Definitely, it's not a perfect analogy but it's close enough to get the point across. Though I suppose one could laminate and frame a printout of their crypto wallet balance if they really wanted to get around that lack of physicality issue.
Re: Please educate me (Score:2)
And that is my point exactly. Aside of psychological effect, all of crypto boils down to a sale of your time and effort, in a tokenized format, that may or may not be worth what someone else is willing to pay. Any other examples have at least a material element to make it have any value whatsoever. Now, do not get me wrong: time and effort are worth something, however this game of you selling someone else work for a profit is just stupid.
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>Not sure about you, but when people who are wealthy invest in something, they didn't earn their Lambos by foolishness, so people should tend to pay attention of what they do.
There's a lot to think about there. I'll just point out that:
1)Most rich people I know got rich through a combination of things that boil down to "good luck" (some worked hard, but decent luck seems prominent in their stories in the end). Some did get there by being geniuses, but I wouldn't count on them being right about things lik
Wait, what? (Score:1, Insightful)
You're saying a glowing auditor's report is not proof of solidity of the company? I think that problem extends well beyond "crypto", whatever that "industry" entails these days. That makes the SEC's focus a bit funny, in the bad sense. But then, we already knew this. The previous iteration, certainly not the first, of swathes of companies failing despite glowing auditor's reports was... 2008 thereabouts? The one where taxpayers got to pay the bills? No, doesn't ring any bells? Carry on then.
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See "AA bonds" Lehman Bros. And the feds were using S&P and Dow to get the ratings... and the companies, who provided the data, were *paying* S&P and Dow to be rated.
No possible corruption there, no, no.
Correction... (Score:3)
"watchdog" should read: lapdog
The market's already beat the SEC here (Score:3)
Part of the reason people are freaking out about Binance is that Mazars just pulled out of their audit and is refusing to work with Binance. I think I read somewhere that other firms are following this in not being willing to audit centralized exchanges anymore.
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Part of the reason people are freaking out about Binance is that Mazars just pulled out of their audit and is refusing to work with Binance. I think I read somewhere that other firms are following this in not being willing to audit centralized exchanges anymore.
I would call that a very interesting development.
Do you have any citations to support the claim? I would like to read them.
Bribes to politicians (Score:3, Insightful)
It seems that the crypto industry has been donating large sums of money to politicians on both sides of the aisle.
They bribes have had their intended effect of getting the government to look the other way until the corruption gets so bad that things just blow up.
This is the way our capital-klepto political-economic system works for the top 1%. The rest of us don't matter.
Any finance auditor touching crypto is suicidal (Score:2)
They all have to know it is hot air and they will have to be able to see that nobody in that space has adequate reserves. You _can_ always limit non-regulatory audits (where the customer defines the scope) so that it _appears_ to be all fine and that is the very reason any reputable finance auditor will not want their name attached to this crap. Unless they are greedy enough that they are not rational anymore. Seems Mazars has had that exceptionally high level of stupidity. Just remember that Enron basicall