The SEC war on crypto is unlikely to end anytime soon
The Securities and Exchange Commission (SEC) settled charges against an auditing firm this week. However, this may just be another salvo in America’s war on crypto.
On March 29, the SEC announced that it had settled with Spicer Jeffries, a Denver-based private equity firm.
Audit engagement partner Sean Tafaro was also accused of “improper professional conduct” in connection with audits of two private funds.
According to the SEC, Spicer Jeffries and Tafaro assessed that “the value of investments was a significant fraud risk.” However, they did not implement the planned audit approach to respond to the risk.
Furthermore, the firm is approved by the Public Company Accounting Oversight Board (PCAOB). This allows for audits of SEC registrants and securities brokers, according to the website.
Crypto tape
The move could be the latest effort by the securities regulator to crack down on the crypto industry and any entities associated with it. In 2018, Spicer Jeffries hosted a “Cryptocurrency Expert Panel” for the Palm Beach Hedge Fund Association (PBHFA).
“Hedge fund managers and quants mingled with investors, technologists, venture capitalists and digital asset experts among many others,” the firm reported at the time.
In December 2022, the SEC increased its scrutiny of audit firms that work with digital asset clients. Paul Munter, the agency’s acting chief accounting officer, told the WSJ: “We caution investors to be very cautious about some of the claims made by crypto companies.”
In the latest settlement, the SEC accused Spicer Jeffries of “failing to obtain sufficient audit evidence” about its methodology for measuring fair value and valuation models.
“The order also finds that Spicer Jeffries’ deficient system of quality control led to non-compliance with professional auditing standards,” it added.
The firm did not admit or deny the allegations, but agreed that the SEC’s order found them to have engaged in improper professional conduct.
Spicer Jeffries agreed to be censored and an independent consultant to review its quality control policies and procedures.
The SEC war on crypto continues
It doesn’t look like Uncle Sam’s war on crypto will end anytime in the near future.
On March 29, SEC Chairman Gary Gensler addressed the Financial Services Subcommittee. In his testimony, he called for increased funding for the agency in the 2024 budget request.
This will move towards more enforcement action against crypto companies. Gensler said the “wild west of crypto markets”, which is “riddled with non-compliance”, needs more attention.
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