SEC urges crypto companies to disclose exposure to recent market collapse
The Securities and Exchange Commission (SEC) has
called on crypto companies to disclose their exposure to the recent market collapse, and detail its potential impacts on investors.
The SEC’s Division of Corporation Finance issued a
letter to U.S.-based crypto companies on Dec. 8, asking them to submit disclosure documents to highlight their business exposure to the recent market contagion resulting from the FTX collapse.
According to the SEC,
the disclosure document should explain if the crypto company was directly or indirectly affected by the market collapse. Its current financial positions, and efforts made to protect customers’ assets.
Companies that have indirect exposure are expected to highlight how the bankruptcy of a third party has impacted their business operations, financial condition, and customers’ assets.
For companies facing liquidity risk, their filing should detail if they have suspended withdrawal requests and the impact on their financial position.
Companies that have publicly traded shares and tokens are required to include how the market collapse has affected the price of their assets since the last reporting period.
Victims of the FTX collapse
FTX was the third largest crypto exchange before It filed for bankruptcy on Nov 11, alongside 130 affiliated crypto companies.
The widespread contagion saw BlockFi file for bankruptcy on Nov. 28, and Gemini exchange halt its Earn program due to Genesis Trading’s liquidity exposure to FTX.
Silvergate Capital reportedly held about 10% of its customers’ assets on FTX, while Galois Capital had over 50% of its capital locked up in the bankrupt exchange.
In the weeks that followed, Canada’s Ontario Teacher’s pension fund said it would write off its $95 million investment in FTX.
Similarly, leading investment firm BlackRock said its $24 million exposure to FTX will not affect its business operations.
