U.S. Senate’s Warren Calls for Crackdown on ‘Sham’ Crypto Audits

The senator and her Democratic colleague Ron Wyden asked the U.S. auditing watchdog to rein in bogus audits in the digital assets sector.

AccessTimeIconMar 21, 2023 at 9:45 p.m. UTC
Updated Mar 21, 2023 at 9:57 p.m. UTC

Sen. Elizabeth Warren (D-Mass.) and another prominent colleague urged the U.S. auditing watchdog to take action against “sham audits” of crypto companies, citing the contribution of such audits to the recent stresses in the U.S. banking system.

The Public Company Accounting Oversight Board (PCAOB), which is authorized and overseen by the U.S. Securities and Exchange Commission (SEC) and funded by audited public companies, acknowledged the potential problem with crypto auditing to the lawmakers, including Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee.

PCAOB Chair Erica Williams said she’s concerned when the auditors her organization oversees “perform ‘sham audits’ – even for entities whose audits generally fall outside of our jurisdiction,” as she wrote in a February response letter shared by the lawmakers.

“Unfortunately, the PCAOB faces statutory limits when it comes to regulating the audits of certain cryptocurrency companies,” Williams wrote.

Warren, who is on the Senate Banking Committee that oversees the SEC and will be instrumental in crafting crypto legislation, and Wyden argued the board does have more legal reach than it’s letting on and can act with “broad responsibility to protect the integrity of the auditing system,” according to a letter they sent to Williams on Tuesday.

“Given that the ongoing use of sham audits of crypto firms conducted by PCAOB-registered auditors mislead the public and threatens the integrity of that auditing system – and we now know, potentially the banking and financial systems – you have both the authority and responsibility to rein them in,” the lawmakers argued.

Earlier this month, the PCAOB’s inspector general had also recently issued a warning that crypto companies’ reserve reports were often based on untrustworthy information – not genuine auditing.


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Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.