SEC Wants Firms to Report Impact of Crypto Bankruptcies, Excess Withdrawals – 24/7 Wall St.


On Thursday, December 8, the Securities and Exchange Commission Division of Corporate Finance posted a sample letter for companies on “recent developments in the crypto asset markets”. The sample has multiple requirements and some of the most prominent include crypto asset disclosure and the effects of the recent “XX” bankruptcies.

SEC Publishes New Guidelines on Digital Asset Reporting

In response to the recent turmoil in the cryptocurrency sector, the SEC’s Division of Corporate Finance recently issued a “sample letter” containing new guidelines for digital asset reporting. According to the Commission, while the list it provided is far from exhaustive, it nevertheless strongly urges companies to take its suggestions into account when submitting a report:

The sample comments do not address an exhaustive list of issues that companies should consider. As always, companies should assess whether they have experienced or may be affected by matters characterized as potential risks and, if so, update their disclosures accordingly. Any comments issued would be appropriately tailored to the specific company and/or transaction, and would take into account disclosure that a company has provided in Commission filings or has otherwise made publicly available. The Division urges companies to consider these sample comments when preparing disclosure documents that may not normally be subject to Division review prior to use, such as automatically effective registration statements and prospectus supplements for recalls. existing registration statements.

Selected examples include disclosure of cryptocurrency holdings and general market exposure of digital assets and entities that have significant exposure to cryptocurrencies. The SEC is also interested in “excessive redemptions or withdrawals” as well as any suspension of withdrawals and redemptions. Perhaps the point most directly associated with the recent collapse of FTX is the request to “discuss how the bankruptcies of XX and XX and the subsequent effects of those bankruptcies have impacted or may affect your business.”

The collapse of FTX and the role of the SEC

While the SEC has been very active in regulating cryptocurrencies throughout 2022, and has been receiving a lot of criticism for his efforts—its effectiveness came under increased scrutiny in the aftermath of the FTX collapse. the questions about whether the Commission did enough to protect investors regarding SBF companies intensified particularly after the exact extent of political donations made by the former billionaire came to light. In addition, comments made by the current CEO of the exchange, the man who oversaw Enron’s bankruptcy, who FTX is actually worse than Enron further eroded public confidence in regulators.

Congressman Tom Emmer, a longtime and vocal critic of SEC Chairman Gary Gensler, was quick to provide his assessment. According to the Representative, the the FTX collapse was a failure of centralized finance and regulators, and not from digital assets and DeFi. However, it is important to note that Emmer was one of the congressmen who blocked an SEC investigation into FTX in March 2022.

Among cryptocurrency firms, none has been more critical of the SEC’s behavior in the wake of FTX than LBRY. LBRY recently lost a case against the Commission about its LBC tokens, a case that could have set a precedent as the token was declared a security even though it was never part of an ICO. Weather company tone and frequency of comments They are likely influenced by the fact that the ruling was made shortly before FTX crashed, in many ways echoing the concerns of a significant part of the crypto community.

This article originally appeared on the tokenist