The Securities and Exchange Commission says companies may have disclosure obligations over how recent crypto bankruptcies may have affected their business.
Photo:
Eric Lee for The Wall Street Journal
WASHINGTON—The Securities and Exchange Commission is asking public companies to detail their exposure to distressed crypto entities following the collapse of trading platform FTX and its affiliates.
In a notice posted to its website Thursday, the SEC said companies may have disclosure obligations related to the direct or indirect impact that recent crypto bankruptcies may have had on their businesses. It provided a list of sample questions that agency staff may pose to certain issuers based on their circumstances.
The information-gathering exercise comes as regulators are scrambling to understand the fallout from the sudden implosion last month of FTX, until recently one of the largest crypto exchanges. FTX’s subsequent bankruptcy has revealed a web of creditors, many of whom haven’t been publicly identified.
Some of the SEC’s queries focused on counterparty risk that public companies may have to crypto-market participants that have filed for bankruptcy, faced heavy redemptions or suspended withdrawals from customers.
“We note that you own or have issued crypto assets and/or hold crypto assets on behalf of third parties,” one of the sample questions said. “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.”
The SEC did not mention any specific firms in the notice. Agency staff expect the companies receiving the queries to number in the dozens.
Many public companies have little or no exposure to cryptocurrencies, which have remained largely shut out of the traditional financial system.
But a handful have built—or redesigned—their businesses around the asset class. They include trading platform
Coinbase Global Inc.,
bitcoin miner
Marathon Digital Holdings Inc.
and and crypto-focused bank
Silvergate Capital Corp.
Write to Paul Kiernan at paul.kiernan@wsj.com
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