The auditor of Binance and Crypto.com's reserves has reportedly stopped work with crypto clients in the wake of FTX's collapse
Carla Mozée
Fri, December 16, 2022
Nurphoto
Mazars Group, which has conducted proof-of-reserve audits for cryptocurrency exchange Binance and others, is halting all work for crypto clients, Bloomberg reported Friday.
The suspension is taking place because of indications that markets haven't been reassured by "proof-of-reserves" reports.
The crypto industry has rushed to conduct proof-of-reserves audits following the failure of crypto exchange FTX last month.
French accounting firm Mazars Group — which has conducted proof-of-reserve audits for cryptocurrency exchange Binance and others — is halting all work for crypto clients, Bloomberg reported Friday. The move comes at a time when the industry is trying to bolster confidence after FTX's implosion.
The work suspension for crypto firms is taking place because of indications that markets haven't been reassured by the reports it had published so far, Bloomberg reported, citing an email from Mazars it had seen. The firm was also concerned about intense media scrutiny, the email said.
Bloomberg said a spokesperson for Mazars said the company will issue a statement in due course and declined further comment.
An audit of proof of reserves aims to confirm that a company's stated holdings are actually there. Such work could detail where a customer's assets are and where they've been. But there's scrutiny surrounding proof of reserves reports as experts have said they only provide a brief snapshot and do not show a firm's liabilities.
The crypto industry has rushed to conduct proof-of-reserves audits following the failure of crypto exchange FTX last month stemming from accusations it misused customer deposits.
Mazars has produced proof-of-reserves reports for Binance and other crypto exchanges including Crypto.com and Kucoin. In a report released earlier this month, Mazars determined Binance's customer bitcoin reserves have more than enough collateral.
The Bloomberg report noted Binance CEO Changpeng Zhao in an interview with CNBC on Thursday said it hasn't engaged a so-called Big Four auditing firm as such companies "don't even know how to audit crypto exchanges."
A website hosting Mazars's reports for crypto clients was currently inactive, Bloomberg reported.
Carla Mozée
Fri, December 16, 2022
Nurphoto
Mazars Group, which has conducted proof-of-reserve audits for cryptocurrency exchange Binance and others, is halting all work for crypto clients, Bloomberg reported Friday.
The suspension is taking place because of indications that markets haven't been reassured by "proof-of-reserves" reports.
The crypto industry has rushed to conduct proof-of-reserves audits following the failure of crypto exchange FTX last month.
French accounting firm Mazars Group — which has conducted proof-of-reserve audits for cryptocurrency exchange Binance and others — is halting all work for crypto clients, Bloomberg reported Friday. The move comes at a time when the industry is trying to bolster confidence after FTX's implosion.
The work suspension for crypto firms is taking place because of indications that markets haven't been reassured by the reports it had published so far, Bloomberg reported, citing an email from Mazars it had seen. The firm was also concerned about intense media scrutiny, the email said.
Bloomberg said a spokesperson for Mazars said the company will issue a statement in due course and declined further comment.
An audit of proof of reserves aims to confirm that a company's stated holdings are actually there. Such work could detail where a customer's assets are and where they've been. But there's scrutiny surrounding proof of reserves reports as experts have said they only provide a brief snapshot and do not show a firm's liabilities.
The crypto industry has rushed to conduct proof-of-reserves audits following the failure of crypto exchange FTX last month stemming from accusations it misused customer deposits.
Mazars has produced proof-of-reserves reports for Binance and other crypto exchanges including Crypto.com and Kucoin. In a report released earlier this month, Mazars determined Binance's customer bitcoin reserves have more than enough collateral.
The Bloomberg report noted Binance CEO Changpeng Zhao in an interview with CNBC on Thursday said it hasn't engaged a so-called Big Four auditing firm as such companies "don't even know how to audit crypto exchanges."
A website hosting Mazars's reports for crypto clients was currently inactive, Bloomberg reported.
Andrew Asmakov
Fri, December 16, 2022
Auditing firm Mazars Group has dropped cryptocurrency firms as clients, according to crypto exchange Binance.
In a statement to Decrypt, Binance said that “Mazars has indicated that they will temporarily pause their work with all of their crypto clients globally, which include Crypto.com, KuCoin, and Binance.”
“Unfortunately, this means that we will not be able to work with Mazars for the moment,” a Binance spokesperson said, adding that the exchange is looking to “embrace additional transparency, exploring the best ways to share those details “in the coming months.”
The firm will also be moving forward with its Merkle Tree-based proof of reserves (PoR) pilot.
As for working with another accounting firm, the spokesperson said that "we have reached out to multiple large firms, including the Big Four, who are currently unwilling to conduct a PoR for a private crypto company and we are still looking for a firm who will do so."
Binance Coin (BNB), the native token of the exchange, responded to the news with a 5.2% drop on Friday, currently trading around $251, according to CoinGecko.
A Crypto.com spokesperson told Decrypt that the exchange completed its proof-or-reserves attestation with Mazars "successfully."
KuCoin did not respond to Decrypt's request for comment.
Mazars' reports pulled off
Last week, Mazars published a proof-of-reserves assessment of Binance, reporting a 101% collateralization ratio for 575,742 Bitcoin in net customer deposits as of November 22. The link to the report on the French firm’s website, however, is no longer working at press time.
Mazars also performed a proof-of-reserves assessment of Kucoin and Crypto.com exchanges, finding that BTC, ETH, USDT, and USDC reserves at Kucoin were overcollateralized as well, while Crypto.com had a 1:1 backing of its reserves.
Both reports have been pulled off the firm’s website as well.
A Mazars spokesperson told Decrypt that it "has paused its activity relating to the provision of Proof of Reserves Reports for entities in the cryptocurrency sector due to concerns regarding the way these reports are understood by the public."
Former SEC Regulator: Binance's Proof of Reserves Audit 'How I Define Red Flag’
The financial health of crypto exchanges came under scrutiny following the collapse of FTX in November, with many trading platforms moving to conduct proof of reserves reports for the likes of Binance and other large exchanges.
Binance’s proof of reserves report has faced hefty criticism, as it was not a full or official audit. It also referred to a snapshot of the exchange’s assets at a certain point of time and did not disclose its liabilities.
Audit firm Mazars ceases proof-of-reserves work for Binance and others
Romain Dillet
Fri, December 16, 2022
Global audit firm Mazars has deleted the website that hosted proofs-of-reserves work for cryptocurrency exchanges. The company told Bloomberg that it is suspending its work with crypto companies on proofs-of-reserves reports going forward.
Mazars appeared a few times in crypto news over the past few weeks because it started issuing those reports for cryptocurrency exchanges. The idea is that exchanges could reassure their users after the FTX downfall. Mazars also used Merkle trees so that users could check that their crypto assets are included in the report by entering a hash.
Clients of the audit firm include Crypto.com and Kucoin. But the most prominent client was Binance. Mazars certified last week that Binance held enough bitcoins and wrapped bitcoins to cover all users’ balances on the exchange as of November 22 at 23:59 UTC.
But when Binance and Mazars announced the proof-of-reserves report for the exchange’s bitcoin reserves, many people were quick to point out that this report only covered a small portion of Binance’s activities.
It could be seen as a step in the right direction, but it doesn’t mean much when it comes to Binance’s handling of all crypto assets across all its products. Similarly, it’s hard to see whether user assets are separated properly from Binance’s own balance sheet.
As long as Binance doesn’t share the full picture, it’s impossible to say with 100% certainty that Binance currently holds user accounts in segregated crypto wallets without any market exposure.
Mazars’ move doesn’t mean that the reports were wrong. It just means that the audit firm doesn’t think working with crypto firms for these reports is worth the risk. People have paid a lot of attention to these reports, which means that Mazars is putting its reputation on the line if one of those exchanges fail in one way or another.
Building trust requires a lot of effort and these auditing reports appeared a bit too quickly after the collapse of FTX. While they were a step in the right direction, proving that user assets are safe will require a more thorough approach.
Binance’s bitcoin reserves are fully collateralized according to auditing firm Mazars
Romain Dillet
Fri, December 16, 2022
Global audit firm Mazars has deleted the website that hosted proofs-of-reserves work for cryptocurrency exchanges. The company told Bloomberg that it is suspending its work with crypto companies on proofs-of-reserves reports going forward.
Mazars appeared a few times in crypto news over the past few weeks because it started issuing those reports for cryptocurrency exchanges. The idea is that exchanges could reassure their users after the FTX downfall. Mazars also used Merkle trees so that users could check that their crypto assets are included in the report by entering a hash.
Clients of the audit firm include Crypto.com and Kucoin. But the most prominent client was Binance. Mazars certified last week that Binance held enough bitcoins and wrapped bitcoins to cover all users’ balances on the exchange as of November 22 at 23:59 UTC.
But when Binance and Mazars announced the proof-of-reserves report for the exchange’s bitcoin reserves, many people were quick to point out that this report only covered a small portion of Binance’s activities.
It could be seen as a step in the right direction, but it doesn’t mean much when it comes to Binance’s handling of all crypto assets across all its products. Similarly, it’s hard to see whether user assets are separated properly from Binance’s own balance sheet.
As long as Binance doesn’t share the full picture, it’s impossible to say with 100% certainty that Binance currently holds user accounts in segregated crypto wallets without any market exposure.
Mazars’ move doesn’t mean that the reports were wrong. It just means that the audit firm doesn’t think working with crypto firms for these reports is worth the risk. People have paid a lot of attention to these reports, which means that Mazars is putting its reputation on the line if one of those exchanges fail in one way or another.
Building trust requires a lot of effort and these auditing reports appeared a bit too quickly after the collapse of FTX. While they were a step in the right direction, proving that user assets are safe will require a more thorough approach.
Binance’s bitcoin reserves are fully collateralized according to auditing firm Mazars
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