US watchdog warns of risks of buying crypto asset securities

March 23 (Reuters) – The U.S. Securities and Exchange Commission on Thursday issued an investor alert warning that firms offering crypto asset securities may not be complying with U.S. laws.

Unregistered offerings of such securities may not provide important data, including audited financial statements, for informed decision making, the SEC said.

The securities watchdog has been cracking down on the crypto industry, which its chair has called a “Wild West” riddled with misconduct. Its efforts gathered pace after November’s collapse of Sam Bankman-Fried’s cryptocurrency exchange FTX.

Crypto exchange Coinbase (COIN.O) announced on Wednesday that it had received a Wells notice – a formal declaration that SEC staff intend to recommend an enforcement action.

In its investor alert, the SEC also warned investors about “proof of reserves” services offered by some crypto exchanges that are supposed to let users verify that an exchange has enough assets to back customers’ holdings.

“Crypto asset entities might use these in lieu of audited financial statements in order to obscure and confuse customers about the safety of their assets,” the SEC said.

Reporting by Hannah Lang in Washington; Editing by Richard Chang

Our Standards: The Thomson Reuters Trust Principles.

Hannah Lang

Thomson Reuters

Hannah Lang covers financial technology and cryptocurrency, including the businesses that drive the industry and policy developments that govern the sector. Hannah previously worked at American Banker where she covered bank regulation and the Federal Reserve. She graduated from the University of Maryland, College Park and lives in Washington, DC.


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