The Securities and Exchange Commission says companies may have disclosure requirements about how recent crypto bankruptcies may have impacted their business.
Photo by Eric Lee for The Wall Street Journal Updated December 8, 2022 6:24 p.m. ET
WASHINGTON – The Securities and Exchange Commission is asking listed companies to detail their exposure to distressed crypto companies following the collapse of trading platform FTX and its affiliates.
In a notice published on its website on Thursday, the SEC said companies may have disclosure requirements related to the direct or indirect impact that recent crypto bankruptcies may have had on their business. It provided a list of sample questions that agency staff can ask specific issuers based on their circumstances.
The intelligence gathering is taking place as regulators scramble to understand the fallout from last month’s sudden implosion of FTX, until recently one of the largest crypto exchanges. FTX’s subsequent bankruptcy exposed a web of creditors, many of whom have not been publicly identified.
Some of the SEC’s inquiries focused on the counterparty risk that publicly traded companies may have to crypto market participants that have filed for bankruptcy, faced large repayments, or had suspended customer payouts.
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“We determine that you own or have issued crypto assets and/or hold crypto assets on behalf of third parties,” reads one of the sample questions. “Explain whether these crypto assets serve as collateral for loans, margin, re-hypothecation, or other similar activities in which you or your affiliates are engaged.”
The SEC did not mention any specific companies in the filing. Agency officials expect dozens of companies to receive the requests.
Many public companies have little or no exposure to cryptocurrencies, which are largely excluded from the traditional financial system.
But a handful have built — or reshaped — their businesses around the asset class. These include trading platform Coinbase Global Inc., bitcoin miner Marathon Digital Holdings Inc. and crypto-focused bank Silvergate Capital Corp.
Write to Paul Kiernan at [email protected]
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