The proof of reserve report, published by the world’s largest crypto exchange Binance, led by the independent auditing company Mazars, has been criticized by many individuals and organizations for being full of incomplete information.
The Wall Street Journal (WSJ) In a news presented by Binance, it was recently announced that mazars It was claimed that the reserve report published under the leadership of the company was full of negative findings and the financial situation of the stock market remained a mystery. Former chief auditor of the U.S. Public Companies Accounting Oversight Board Douglas Carmichael He said that the reserve report presented “unsatisfactory to prove the stock market’s financial standing or liquidity” he stated.
Financial Accounting Standards Board (FASB) The report published by audit firm Mazars, as stated by its former member, is based on the quality of internal controls and the margin credits of Binance’s systems. lacks information on how he liquidated assets because does not give investors confidence about the financial condition of the stock market.
In addition, the “subtitles” of the report This should not be seen as a complete control. makes it clear, and the Mazars front has confirmed it.
However, the discrepancies between the total Bitcoin liabilities presented in the report and the actual existing Bitcoin liabilities are also noteworthy. The exchange’s proof of reserve, with the exception of Binance’s assets lent to users via loans or margin accounts 97% rate is collateralized and reserves are transferred to customer assets. 1:1 ratio it says unreachable.
In Mazars’ letter, the difference was described as “the difference arising from the account of Excluded Assets pledged by customers as collateral for Included Assets.” With the inclusion of Included Assets per this account, Binance’s 101% It was concluded that the rate was guaranteed.
former chief executive John Reed Stark: Red Flag!
Reputed twitter account “mgr“He went so far as to suggest that Binance may be collaborating certain wallet addresses with exchange deposits and even deliberately choosing to “misdirect”. Kraken CEO Jesse Powell However, Binance’s report is “OPENLY not a traditional proof of reserve”. tweet shared.
former chief executive of the SEC John Reed Stark He also said the report “does not address the effectiveness of internal financial controls, does not express an opinion or assurance, and does not vouch for the figures”:
I worked for the SEC for 18 years. I describe this as a “red flag”.
On the other hand, it seems that Mazars is also the preferred institution for proof of reserve by other leading cryptocurrency exchanges and this attracts attention. Recently Crypto.com and on KuCoin He made statements about his agreement with Mazars.
But Mazars does not have a very bright report by the official authorities. Financial Reporting Council (FCR) A 2022 report concluded that Mazars “growth very quickly, taking in higher-risk inspections left by their peers without adequate controls to provide high-quality inspections.” The FRC made the following statements on the subject:
Of the eight audits we reviewed at Mazars and five of the 12 audits we reviewed at BDO, they needed more than limited improvements, so their shortcomings were obvious. These results indicate a worse and unacceptable downward trend compared to the previous year.