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Paul Munter, the US SEC’s current chief accountant, has issued a warning to crypto investors. Munter advised crypto supporters not to trust a firm’s Proof-of-Reserve (PoR) audit.

Munter issued the warning on Thursday while speaking with The Wall Street Journal in an interview. “We are advising investors to proceed with extreme caution when it comes to certain assertions made by cryptocurrency firms,” Munter stated.

Be Wary Of PoR Audits – SEC’s Chief Accountant 

Since the fall of the FTX crypto exchange, several crypto firms have published their PoR. The aim is to reassure users that their funds are safe and the company is financially sound.

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However, the SEC official argued that these PoR audits are insufficient to show a company’s financial position. Besides, some officials argue that crypto firms could manipulate the reports.

Furthermore, he said the PoR reports do not have enough information that would help stakeholders. Hence, stakeholders might invest in firms without proper information to guide them.

Before investing in a firm, investors must evaluate if the firm has enough assets that can cover the liabilities. On December 12th, Munter spoke at a conference for Certified Professional Accountants in Washington.

At the conference, he argued that the structure of crypto companies was always changing. This constant change made it difficult for regulators to make policies to guide their operations.

According to the WSJ, Munter stated that SEC would refer the issue to the enforcement division if it uncovers some shady dealings with crypto firms.

Crypto Firms And PoR Reports

At the beginning of December, the SEC’s former Chief for Internet Enforcement, John Reed Stark, raised the alarm on Twitter. Stark alleged that Binance’s PoR report had some pitfalls.

According to him, the crypto exchange’s PoR audit report failed to address major aspects of the company. It includes the effectiveness of Binance’s internal financial control and how the company balanced its reserves.

A few days after Stark’s red alert, Mazars Group removed Binance’s audit report from its platform. According to reports, the auditing firm no longer offers auditing services to crypto firms.

Before that time, Mazars Group worked with renowned crypto firms such as and KuCoin. In a recent interview, Ben Sharon, the co-founder of Illumishare SRG, noted that a PoR audit is a good way to renew users’ trust in crypto exchanges.

Sharon further said that depending on PoR audits is insufficient to prove transparency. Other factors are also important. Meanwhile, crypto users lost millions of dollars in 2022 to crypto firms that have gone bankrupt or ended their services abruptly.

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George Ward

By George Ward

George Ward is a crypto journalist and market analyst at Herald Sheets, known for his engaging articles on the latest digital currency trends. With a background in finance and journalism, he presents complex topics accessibly. George holds a degree in Business and Finance from the University of Cambridge.