Bitcoin Miner Marathon Digital Clears Long SEC Accounting Review

The SEC has concluded a more than two-year review of financial disclosures at Bitcoin miner Marathon Digital Holdings Inc., which uncovered errors forcing accounting restatements covering several quarters as the regulator’s questions dragged on.

Staff at the Securities and Exchange Commission traded more than 30 letters with the crypto miner from April 2022 to June 2024, according to documents the agency released Tuesday. Agency reviewers lobbed questions about everything from how the company calculated drops in the value of its Bitcoin stash to how it tallied the top line in its income statement.

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The unusually long review—almost 800 days—is more than 13 times longer than the typical amount of time it takes for the SEC to conduct financial disclosure reviews. In 2023, 72% of SEC queries to companies wrapped up within 60 days, according to a report from audit firm Deloitte & Touche LLP.

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Marathon Digital is one of the largest publicly traded crypto-mining companies by computing power. The company said the high volume of regulator questions was due to the relatively new nature of the digital asset industry and the lack of formal accounting rules until recently.

“All SEC comments to date have been resolved and closed out,” Marathon Digital Chief Financial Officer Salman Khan said in a statement. “Marathon does not anticipate any further questions.”

Lack of Guidance

The length and breadth of the review speaks to the SEC’s scrutiny of the crypto industry as well as the recent absence of clear accounting rules about complex crypto accounting transactions. Until December 2023, no part of US generally accepted accounting principles, or GAAP, spelled out how companies should account for cryptocurrency or other digital assets.

“Part of the explanation lies in the space of limited accounting guidance,” said accounting analyst Olga Usvyatsky, who studies SEC comment letter trends.

Prior to the Financial Accounting Standards Board issuing its crypto accounting rules, businesses with large crypto holdings followed guidance from the American Institute of CPAs saying businesses that aren’t investment firms should account for crypto holdings as intangible assets. The upshot: companies recorded crypto on their balance sheets at historical cost, minus drops in value during the period. The losses could never be reversed. For volatile digital assets, it meant companies almost always had to record impairments, even if the price rebounded.

Companies tripped over how to calculate those impairments before the new rules took effect. In 2023, Marathon Digital, along with crypto miners Riot Platforms Inc. and Bit Digital Inc., had to restate previous financial statements to correct errors flagged by the SEC.

The SEC’s queries to Marathon Digital started in April 2022, when the regulator asked the company several questions about its 2021 year-end financial report. Agency staff asked why Marathon didn’t disclose that it had long-term debt when other parts of its financial filing mentioned convertible notes. The staff also told the company that it was inappropriate to strip out Bitcoin impairments in the earnings measures it uses to report results to Wall Street.

As the exchange stretched into 2023, the SEC dug further, concluding with the 2023 10-K that Marathon published earlier this year. Staff reviewers asked the company to explain its revenue recognition methods and its cash flows, among other topics. In April 2024, the staff asked about the company’s adoption of FASB’s brand-new crypto accounting rules and why it hadn’t provided disclosures required by the accounting standard. Once Marathon answered all questions, the SEC concluded its review.

The SEC’s Division of Corporation Finance reviews corporate financial reports on a regular basis, sending comment letters when it has questions about key accounting estimates and disclosures. Once a company responds and the SEC agrees with its conclusions, the regulator typically closes the file and makes all correspondence public about 20 business days later.

—With assistance from Andrea Vittorio and Bloomberg’s David Pan