Former Kraken CEO Jesse Powell has criticized the “proof of reserve” system that emerged after FTX’s collapse. He suggested that the market’s largest Bitcoin exchange carries a “big red flag”…
Jesse Powell raises the alarm about this Bitcoin exchange
In his new statements, Kraken CEO criticized Binance’s “proof of reserve” reports to regain investor confidence after FTX’s bankruptcy. In particular, it was notable that Binance said it detected some distortions in its proof-of-reserve report.
After a series of high-profile bankruptcies throughout the year, the crypto market is now watching the million dollar funds coming out of Binance. On December 13, Tron founder Justin Sun withdrew $100 million in BUSD from Binance wallet. Binance was previously on the agenda with a $2 billion Bitcoin transfer. The leading exchange ended the speculation by stating that these transactions were made within the scope of proof of reserve audits.
Kraken CEO Jesse Powell takes a different take on proof-of-reserve reports. He says these seem more like an attempt to prove collateral than to prove reserves. His recent tweets also wrote:
The big red flag for me is that this seems more like an attempt to prove collateral than to prove reserves. They even admit to bankruptcy regarding real assets owed against controlled tokens. The ‘collateral’ accounting trick is exactly how volatile FTX’s bankruptcy is.
Red flags about Binance
Powell then shared details about the working principles of Mazars firm, which oversees Binance’s reserves. The Mazars report was particularly criticized for its lack of knowledge of the quality of internal controls and the methods used by Binance systems. Powell questions who controls BTCB and BBTC, pointing to FTX Token manipulation:
This (items below) is the easy stuff to say that this is DEFINITELY not conventional Evidence of Reserves and real journalists should investigate immediately. Margin value usage: Why? including negative balances? Don’t you sign your wallet? Who issues BTCB and BBTC?
After his harsh statements, Powell stated that he was not trying to spread fear in the market. He also stated that he would “raise” any issues he had previously seen with the industry, particularly those with proof of reserve:
I’m not trying to FUD on Binance. I’ve only pointed out misinformation about Proof of Reserves, attempts to redefine the term, and shortcomings of collateral accounting. There’s a lot of bad information out there.
Mazars review approved leading Bitcoin exchange
“We found that Binance is 101% collateralized,” the audit firm said in its December report. cryptocoin.comAs you follow, the large amount of fund outflows in the last days is causing concerns about Binance in this regard.
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