The SEC has concluded a greater than two-year overview of economic disclosures at Bitcoin miner Marathon Digital Holdings Inc., which uncovered errors forcing accounting restatements overlaying a number of quarters because the regulator’s questions dragged on.
Workers on the Securities and Trade Fee traded greater than 30 letters with the crypto miner from April 2022 to June 2024, in keeping with paperwork the company launched Tuesday. Company reviewers lobbed questions on the whole lot from how the corporate calculated drops within the worth of its Bitcoin stash to the way it tallied the highest line in its earnings assertion.
The unusually lengthy overview—nearly 800 days—is greater than 13 occasions longer than the everyday period of time it takes for the SEC to conduct monetary disclosure opinions. In 2023, 72% of SEC queries to firms wrapped up inside 60 days, in keeping with a report from audit agency Deloitte & Touche LLP.
Marathon Digital is without doubt one of the largest publicly traded crypto-mining firms by computing energy. The corporate stated the excessive quantity of regulator questions was because of the comparatively new nature of the digital asset trade and the shortage of formal accounting guidelines till lately.
“All SEC comments to date have been resolved and closed out,” Marathon Digital Chief Monetary Officer Salman Khan stated in an announcement. “Marathon does not anticipate any further questions.”
Lack of Steerage
The size and breadth of the overview speaks to the SEC’s scrutiny of the crypto trade in addition to the latest absence of clear accounting guidelines about complicated crypto accounting transactions. Till December 2023, no a part of US typically accepted accounting rules, or GAAP, spelled out how firms ought to account for cryptocurrency or different digital property.
“Part of the explanation lies in the space of limited accounting guidance,” stated accounting analyst Olga Usvyatsky, who research SEC remark letter tendencies.
Previous to the Monetary Accounting Requirements Board issuing its crypto accounting guidelines, companies with giant crypto holdings adopted steerage from the American Institute of CPAs saying companies that aren’t funding companies ought to account for crypto holdings as intangible property. The upshot: firms recorded crypto on their steadiness sheets at historic value, minus drops in worth in the course of the interval. The losses may by no means be reversed. For unstable digital property, it meant firms nearly at all times needed to file impairments, even when the price rebounded.
Corporations tripped over how to calculate these impairments earlier than the brand new guidelines took impact. In 2023, Marathon Digital, together with crypto miners Riot Platforms Inc. and Bit Digital Inc., needed to restate earlier monetary statements to right errors flagged by the SEC.
The SEC’s queries to Marathon Digital began in April 2022, when the regulator requested the corporate a number of questions on its 2021 year-end monetary report. Company workers requested why Marathon didn’t disclose that it had long-term debt when different elements of its monetary submitting talked about convertible notes. The workers additionally informed the corporate that it was inappropriate to strip out Bitcoin impairments within the earnings measures it makes use of to report outcomes to Wall Avenue.
Because the alternate stretched into 2023, the SEC dug additional, concluding with the 2023 10-Okay that Marathon revealed earlier this 12 months. Workers reviewers requested the corporate to elucidate its income recognition strategies and its money flows, amongst different matters. In April 2024, the workers requested concerning the firm’s adoption of FASB’s brand-new crypto accounting guidelines and why it hadn’t supplied disclosures required by the accounting normal. As soon as Marathon answered all questions, the SEC concluded its overview.
The SEC’s Division of Company Finance opinions company monetary experiences regularly, sending remark letters when it has questions on key accounting estimates and disclosures. As soon as an organization responds and the SEC agrees with its conclusions, the regulator sometimes closes the file and makes all correspondence public about 20 enterprise days later.
—With help from Andrea Vittorio and Bloomberg’s David Pan