SEC under fire, pressures public companies to disclose crypto exposure

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(Kitco News) – The Securities and Exchange Commission on December 8 issued a directive to all publicly traded companies in the United States warning them that they must review their disclosure obligations with respect to crypto, even if the regulator and its leaders are coming under increasing fire from lawmakers.

Recent bankruptcies and financial difficulties of crypto asset market participants have caused widespread disruption in these markets, they wrote. Companies may have disclosure obligations under federal securities laws related to the direct or indirect impact that these events and collateral events have had or may have on their business.

The SEC division of Corporation Finance (DCF) wants companies to assess their information in order to provide investors with specific and personalized information on market events and conditions, the company’s situation in relation to [them], and the potential impact on investors. The DCF added that companies with ongoing reporting obligations should check whether their existing information needs to be updated.

The DCF also shared a sample letter containing 16 areas of questions they would ask companies about their exposure to crypto markets, including a company’s exposure to counterparties and other market participants; risks relating to a company’s liquidity and its ability to obtain financing; and risks related to legal proceedings, investigations or regulatory impacts on the crypto asset markets.

The SEC has recently come under scathing criticism from lawmakers and market participants for its apparent failure to shield investors from the collapse of FTX and Alameda Research last month, despite the chairman’s high-profile meetings. from the SEC, Gary Genslers, with former FTX CEO Sam Bankman. -Fried.

On Wednesday, New York Congressman Ritchie Torres wrote a letter to Gene Dodaro, Comptroller General of the United States Government Accountability Office (GAO), in which he called on Dodaro to conduct an independent review of the inability of the SEC to protect the investing public from gross mismanagement. and misdeeds of FTX.

Torres wrote that Gensler is singularly responsible for the regulatory failures surrounding FTX’s collapse, which caused billions in losses to creditors and customers.

Chairman Gensler has said countless times that there is no need to authorize congressional legislation: the SEC currently has the authority it needs to regulate crypto exchanges, he wrote. If the SEC has the authority claimed by Mr. Gensler, why has he failed to uncover the largest crypto Ponzi scheme in US history? You can’t have it both ways, asserting your authority while avoiding accountability.

Torres said that instead of investigating crypto exchanges, the SEC under Gensler chose to spend scarce time and resources investigating Kim Kardashian and called FTX a car house built on monopoly printed money from scratch.

He added that Mr. Gensler’s leadership has left SEC career staff fundamentally demoralized in an extent rarely seen, with the SEC inspector general reporting the highest attrition rate in a decade.

After the collapse of FTX, the SEC announced that it was in fact investigating the exchange for possible violations of money laundering laws.

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