The US Securities and Exchange Commission is tightening ropes around regulations, warning investors to not trust any proof-of-reserves reports of crypto companies even if they are audited. SEC also warns auditing firms not to risk their reputation over Web3 companies, WSJ reports.
This extreme scrutiny against crypto firms comes after FTX, which had claimed to be audited by two audit firms, turned out to be a huge Ponzi scheme, costing billions of dollars in loss to the investors.
As a result, the regulator claims that people shouldn’t fully trust their money in the crypto firm just because it has a proof-of-reserve report listed because it can hide information and not share its financial position even if it is at a loss.
In relation to this news, speculations surround Binance’s financial position despite it releasing an AUP report done by Mazars, which raised more questions and concerns than answering them.
So far, the BNB coin price has dropped as people pull out billions of dollars from the exchange.
Following SEC’s warning, auditing firms are also backing out from auditing crypto companies. It seems to have become hard for any centralized exchange or company to bring back the trust of investors.
Nonetheless, builders and creators are motivated to keep developing the industry despite the negativity.
