The Securities and Exchange Commission (SEC) wants public companies to provide investors with details of their exposure to beleaguered crypto firms following the swift and spectacular downfall of crypto trader FTX and its sister companies.
The SEC informed companies they may have disclosure obligations related to how recent challenges in the crypto market have affected them, directly or indirectly, the SEC said Thursday in a post on its website, alongside a sample letter it will send to companies.
The SEC laid out 16 questions for companies to address, including sharing the material impact of “significant crypto asset market developments” on their financial conditions and share prices — such as the price volatility of crypto assets.
“We note that you own or have issued crypto assets and/or hold crypto assets on behalf of third parties,” the regulator noted in one query. “To the extent material, explain whether these crypto assets serve as collateral for any loan, margin, rehypothecation, or other similar activities to which you or your affiliates are a party.”
“Describe any material risks to your business from the possibility of regulatory developments related to crypto assets and crypto asset markets,” another query said. “Identify material pending crypto legislation or regulation and describe any material effects it may have on your business, financial condition, and results of operations.”
The SEC didn’t name specific firms in its notice. Agency personnel told The Wall Street Journal they expect “dozens” of companies to be contacted.
FTX, which as recently as early November, was one of the world’s largest crypto exchanges, may have more than 1 million creditors, according to bankruptcy filings.
Several crypto companies were tossed into turmoil following FTX’s bankruptcy, including BlockFi, which also subsequently filed for bankruptcy. A number of banks have been revealed to have ties to FTX, but most of its creditors remain unidentified.
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Lawmakers, meanwhile, are gearing up for hearings on FTX’s collapse. FTX founder and former CEO Sam Bankman-Fried announced Friday he would testify Tuesday in front of the House Financial Services Committee, specifically addressing “FTX US's solvency and American customers, ... pathways that could return value to users internationally, ... what I think led to the crash ... [and] my own failings.”
Lawmakers said Thursday that they planned to subpoena him if he declined to show up to the hearings in person. Bankman-Fried did not say whether he planned to attend a Senate hearing Wednesday.
“I still do not have access to much of my data — professional or personal. So there is a limit to what I will be able to say, and I won't be as helpful as I'd like,” Bankman-Fried tweeted Friday.
