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One month after FTX case, SEC reacts and asks cryptocurrency companies for more data



Key facts:
  • The SEC presented a model letter that companies with monthly reporting could follow.

  • The SEC did not mention companies in bankruptcy, such as FTX, Celsius, Voyager, and BlockFi.

The U.S. Securities and Exchange Commission (SEC) has required U.S. companies to disclose more detailed information about the impact of this year’s bitcoin (BTC) and cryptocurrency company bankruptcies on their finances and operations. This confirms the regulator’s first move nearly a month after the FTX exchange case.

Without directly citing them, the SEC’s Division of Corporation Finance is. reported to the “recent bankruptcies and financial difficulties” of at least four companies related to the bitcoin ecosystem: lenders Celsius and BlockFi, broker Voyager, and the aforementioned FTX. Y probably another lender, Genesis Capital.

In a publication on its official website, the SEC stated that such bankruptcies force companies to cryptocurrencies that are still alive and submit monthly reports to the SEC, to disclose more information about the true state of their conditions and “the potential impact on investors.”

In more detail, companies must provide “any additional material information necessary to provide the requested information.”

The SEC’s action comes nearly a month after the start of the FTX crisis, which was among the three cryptocurrency exchanges the largest cryptocurrency exchange in the market. It should be noted that this body has challenged the authority to regulate the Bitcoin market in the United States for months, to the point of wanting to oversee the exchanges. as stock exchanges.

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A model letter

To disclose the required information, the regulator has provided a model “letter.” The document is available for review on the SEC website, asks companies to analyze the impact their peers’ failures have had on their well as their financial condition, consumers, and counterparties, “directly or indirectly.”

The letter also states that companies must disclose whether they possess tangible assets that might not be recovered through bankruptcies.Or may be lost or misappropriated.

The letter also requires companies to describe “any direct or indirect exposure” to other counterparties, customers, custodians, or other participants in the cryptocurrency industry. This is especially true for those that have filed for bankruptcy, suspended withdrawals, failed to account for customer assets, or had compliance issues.

The sixth point of the SEC letter highlights that the regulator identifies companies that serve as custodians of cryptoassets. These companies “will be required to disclose whether such assets serve as collateral for any loanmargin, re-mortgaging or other similar activities.”

Such a move could be interpreted as “anti FTX,” considering that there are allegations against its former CEO, Sam Bankman-Fried, of using customer funds to financing the other company’s Alameda Research, as reported by CryptoNews.

This would not be the first “anti FTX” proposal in the United States. It was reported in this newspaper yesterday that U.S. Congressman Ritchie Torres has submitted two legislative proposals with these characteristics before the lower house of Congress. Both are focused precisely on to avoid practices such as the exchange bitcoin and cryptocurrency exchange.

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The SEC clarifies that this model letter is only a guideline and “is not a rule, regulation or filing with the SEC.”

“The SEC has neither approved nor disapproved its contents. This guidance, like all staff guidance, has no legal force or effect: it does not alter or amend applicable law and does not create new or additional obligations for any person,” the agency said.

The ripple effect

As CryptoNews has widely reported, this 2022 was characterized by. by a domino effect in the fall of cryptocurrency companies.. The beginning of this crisis dates back to March, when cryptoasset projects collapsed. Earth and Moonby South Korean entrepreneur Do Kwon, who provided the basis for the bear market.

The exposure of some companies to these cryptocurrencies created havoc. Shortly after the crisis began, several companies found themselves in financial difficultieswhich led to the first bankruptcies in the United States: Celsius and Voyager.

Then came news of SBF’s risky moves with its exchange token, FTT, as well as allegations of embezzlement, which caused a rush that eventually brought down the leading cryptocurrency exchange.

The collapse did not happen on its own. The crisis already underway was exacerbated by this collapse, which caused other similar companies to undertake their own debacles as well.. One of these was the lender BlockFi, one of the most prominent, which, following in the footsteps of FTX filed for bankruptcy last November.

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