Gensler chided platforms for not walling off the different parts of their business, such as custody and market-making functions. He also said client funds often aren’t being properly segregated — a problem that’s gained a lot of attention following the failure of FTX.
On Thursday, Gensler also took issue with so-called proof-of-reserves reports, which some crypto firms publish to prove they have enough funds on hand to back customer deposits. Gensler said the practice, which has been used by major crypto firms including Binance Holdings Ltd., falls short of the disclosures needed to protect investors.
“Proof of reserves is neither a full accounting of the assets and liability of a company, nor does it satisfy segregation of customer funds under the securities laws,” Gensler said.
Source: SEC’s Crypto Crackdown Is Just Getting Started After FTX Blowup