US Regulator Forces Firms to Disclose Crypto Bankruptcies

WASHINGTON – Publicly traded companies exposed to “crypto winter” and collapseFTXor otherscompanies holding digital assets will be required to disclose this information to investors in accordance with new guidance from the U.S. Securities and Exchange Commission (SEC).The disclosure is likely to apply directly to companies that include digital assets in their business. But the guidance released on Thursday indicates that it could apply to any company with a material relationship to the troubled cryptocurrency market.

“Recent bankruptcies and financialdifficulties among cryptoasset market participants have led to widespread disruption in these markets”, – writes the SEC Division of Corporate Finance. “Companies may have disclosure obligations under the federal securities laws related to the direct or indirect impact that these events and related events have had or may have on their business” The guidance is one of the SEC's first public steps to address uncertainty in the cryptocurrency market following the collapse of FTX, which filed for bankruptcy in November. According to this guidance, companies should consider the overall impact of changes in the crypto asset market and whether they are exposed to counterparty risk. In addition, they should consider risks related to the company's liquidity and ability to obtain financing, as well as legal and regulatory issues, the guidance says.

FTX faces several federalinvestigations, including by the US Securities and Exchange Commission. Agency staffers who scrutinize public company disclosures will be keeping an eye on the details of how crypto industry bankruptcies – and their consequences – could impact companies, according to one sample commentary in the guide. “Check whether you have tangible assets that cannot be returned due to bankruptcies or may otherwise be lost or misappropriated”, – employees urge. Companies must also explain how they take steps to protect customers' crypto assets, as well as policies or procedures in place to prevent self-trading or conflicts of interest, the sample letter states.BLOOMBERG