The Securities and Exchange Commission sends a letter to US public companies asking companies to assess their disclosure obligations, including “tailored specific disclosure”, on how the recent crypto bankruptcies and broader financial difficulties in the market digital assets may have affected their business.
The letter is intended to illustrate the type of comments the securities agency might send to public companies.
“In meeting their disclosure obligations, companies should consider the need to consider market developments in crypto assets in their filings generally, including in their business descriptions, risk factors and discussions. and management analysis,” the SEC’s Corporate Finance Division said in its statement.
In an attached sample letter, the agency asks companies to disclose their relationship with other companies that have filed for bankruptcy, experienced excessive buybacks (bank runs), have unaccounted crypto assets, or have experienced “corporate compliance hardware failures”.
Asked whether cryptocurrencies need their own bespoke set of rules, SEC Chairman Gary Gensler told Yahoo Finance on Wednesday that the agency would enforce securities laws already in place.
Gensler noted that the SEC has already taken 100 enforcement actions against crypto firms, including a few dozen under its mandate.
“The basic message I received is the same public message as the private message,” Gensler told Yahoo Finance. “Come into compliance. Your domain won’t last long outside public policy standards.”
The letter then encourages companies to share how they protect customer crypto assets and what governance protocols they have in place to avoid conflicts of interest.
The agency also recommended that companies discuss whether market conditions have affected how their business is perceived, how pending crypto regulation could affect financial conditions or business, particularly in the form a company’s stock price, customer demand, debt financing, or “pending or known” legal proceedings. to be threatened. »
The SEC letter comes after offshore crypto exchange FTX filed for Chapter 11 bankruptcy on November 11. The Bahamas-based crypto firm, which has an estimated $8 billion hole in its balance sheet, has sparked a wave of financial contagion among other companies in the industry.
The $8 billion hole came after reports and bankruptcy court documents suggested the company lent money to former FTX CEO and Sam Bankman-Fried’s trading company, AlamedaResearch. In a court document, FTX’s new management called the company’s collapse “a complete failure of corporate controls.”
Events surrounding FTX’s collapse prompted crypto lender BlockFi to also declare bankruptcy, while others, like Genesis Trading’s lending divisions and crypto exchange Gemini, suspended withdrawals and began trading. organize themselves as creditors.
A Coindesk report revealed over the weekend that Genesis owes creditors at least $1.8 billion, of which $900 million belongs to Gemini. The total market value of all crypto assets has fallen from $200 billion to $860 million in the past month according to Coinmarketcap.
David Hollerith is a senior reporter at Yahoo Finance covering cryptocurrency and stock markets. Follow him on Twitter at @DsHollers
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