PCAOB Warning: Crypto "Reserve Reports" are Not Audits and Cannot be Trusted

Crypto Sector’s Reserve Reports Can’t Be Trusted, Says U.S. Audit Watchdog

Proof-of-reserve reports routinely touted by crypto firms to assure customers that their financial transactions are in secure hands shouldn’t be trusted, according to the U.S. organization that oversees auditing standards.

The Public Company Accounting Oversight Board (PCAOB) – an industry-funded watchdog working under the authority of the Securities and Exchange Commission – said the reports that tally reserve holdings as proof a company is protected against financial runs don’t provide “meaningful assurance.” They’re not audits, the board said in a Wednesday statement, and they don’t comply with any particular standard.

Silvergate shutting down operations, liquidating after crypto meltdown

Silvergate Capital , a central lender to the crypto industry, said on Wednesday that it’s winding down operations and liquidating its bank. The stock plunged more than 36% in after-hours trading.

Silvergate has served as one of the two main banks for crypto companies, along with New York-based Signature Bank . Silvergate has just over $11 billion in assets, compared with over $114 billion at Signature. Bankrupt crypto exchange FTX was a major Silvergate customer.

“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward,” the company said in a statement.

Nothing Redeems CryptoYet letting crypto burn would allow the most shameless actors to gamble on a quest for resurrection. The ease of spinning out new tokens makes an attempt to return to the tables irresistible. The disgraced author of the Terra/Luna debacle, which vaporized billions of dollars overnight in May 2022, immediately returned to the market with Terra 2.0. The disgraced founders of Three Arrows Capital, bankrupted in July 2022, now want to buy up crypto users’ bankruptcy claims, funded by—you guessed it—the proceeds of a new crypto token. And those bankruptcy claims remain in limbo only because the management of such crypto firms as Celsius, Voyager Digital, BlockFi and Genesis continue to pay themselves fat salaries in Chapter 11 bankruptcy rather than liquidate their remaining assets to repay creditors. Judges and trustees should help purge the system by pressing bankrupt crypto firms into liquidation without further delay.

Crypto is part chlorofluorocarbon, part cocaine and part bearer bond. It isn’t the future of finance. More than malign neglect, the U.S. needs policies that will eliminate cryptocurrencies and their metastases.

Crypto.com Struggles to Maintain Fiat On-Ramps in the Face of Crypto Banking Crisis

The digital assets industry is in the middle of a banking crisis with the collapse of crypto-friendly Silvergate Bank, and Crypto.com hasn’t been spared.

The Singapore-headquartered exchange is only now able to provide Euro-denominated banking services to users in the European Economic Area (EEA), having previously lost the ability to accept USD deposits because of issues with its banking partners.

U.S. Justice Dept, SEC are no-shows in Slack direct listing case at Supreme Court

The stakes, after all, are high for both investors and companies that want to tap the capital markets. Slack and its supporters contend that the 9th Circuit upended market expectations by ditching the longstanding “tracing requirement” that Securities Act plaintiffs must show that their shares were sold under the auspices of the misleading registration statement. Investors, meanwhile, argue that courts cannot allow companies to evade Securities Act liability by offering the public a mix of registered and unregistered shares.

The Biden administration has nothing to say on the matter.

The solicitor general’s office did not submit an amicus brief for either Slack or lead investor Fiyyaz Pirani. The deadline has now passed, which means that the Supreme Court will decide the fate of the tracing requirement in Securities Act class actions without hearing from the Justice Department or the SEC.

Cornerstone Research: Securities Suit Settlements at High Levels in 2022

In looking ahead, the authors note that given the reduced numbers of securities class action lawsuit filings during 2021 and 2022, settlement activity may slowdown or flatten out in the upcoming years, absent an increase in the dismissal rate. In addition, given the more active SEC enforcement approach under the current administration, the number of settled cases involving parallel SEC actions may increase, reversing a recent trend toward fewer settlements involving parallel actions. Finally, given the increase in the numbers of filings in 2021 and 2022 involving COVID-19, SPACs and cryptocurrencies, “we expect increased settlement activity for these cases in the future.”

Silvergate Bet Everything on Crypto, Then Watched It Evaporate

Silvergate Capital Corp. spent its final days under siege.

Bombarded by shortsellers, deserted by depositors and shunned by business partners, executives at the crypto-focused bank were face-to-face with US regulators at its La Jolla, California headquarters.

Officials from the Federal Deposit Insurance Corp. had arrived at the firm’s offices, intent on averting the US banking system’s first casualty from the crypto implosion. Among options they discussed were finding crypto-investors to help shore up liquidity amid the bank’s mounting losses. But a desperate round of calls to potential investors failed, with no firm willing to shoulder the burden of associating with a bank mired so deeply in the industry’s upheaval.