- The SEC’s chief accountant has warned accounting firms that they may be held accountable for the financial wrongdoings of their crypto clients.
- Paul Munter advised audit firms to avoid engaging with crypto companies to avoid getting caught up in their transgressions
- The aim is clearly to ensure that crypto firms remain unaudited, furthering the SEC’s claims on this matter
The Securities and Exchange Commission’s (SEC) chief accountant has warned accounting firms that they could be held responsible for financial wrongdoings from crypto clients in the latest move from the agency to prevent digital asset firms from legitimizing themselves. The SEC published a piece from Paul Munter yesterday in which he wanted that “material misstatements” from crypto firms over their financial affairs “could result in legal liability for the accounting firm,” most notably when it comes to, you guessed it, cryptocurrencies potentially being ruled as securities.
SEC: Don’t Touch Crypto Companies
The SEC has made a name for itself over the past couple of years thanks to its crypto crackdown, which has seen it do all it can to push Americans away from digital assets by treating them all (bar Bitcoin) as securities and helping to restrict access to them. Not content with this, it now seeks to ensure that crypto firms cannot possibly hope to achieve the level of clarity needed to legitimize themselves by warning accounting firms that they could face serious consequences if they do.
Munter warns that audit firms which become engaged with crypto companies risk punitive measures if the project in question treats “some sort of review of certain parts of their business” as an audit. Such practices have been used in the past, especially by stablecoin companies, to claim that an accounting firm has verified their holdings.
Such actions don’t tend to take place any more, however, with the firms themselves and even crypto users becoming aware of the differences between an audit and an attestation.
Munter is clear in his warning to accounting firms to stay away from crypto projects, advising that they must carefully consider the statements made about the scope of work and procedures performed by the project in question to avoid legal liability for material misstatements that could lead to violations of antifraud provisions of federal securities laws.
Violations of antifraud provisions and independence requirements could result in censure or suspension of the firm, or its accountants, Munter warns, emphasizing the importance of maintaining public trust and confidence in the accounting profession.
Auditors Will Stay Away, Just as the SEC Desires
It’s no surprise that the SEC is picking out crypto firms as being the accountant’s boogeyman, most of which will already have been well aware of their responsibilities when it comes to taking on new clients from any sector. The message the SEC wants to get across of course is that crypto clients are more untrustworthy than those in other sectors, which could have the knock-on effect of crypto firms being unable to get third-party audits, something that Tether and Binance have already said is a problem.
The SEC can then point to a lack of third-party audits as an example of how illegitimate crypto companies are, boosting its narrative that they do not want to comply with regular financial laws.
See, it’s easy when you know how (and have the power).
