"Binance has said it holds more than $60bn in assets, enough to honour withdrawals. The company’s disclosures do not include its liabilities, which makes it difficult to ascertain its financial health."
> If you have assets in an un-audited exchange, get them out now.
This is Mexican standoff. The only "value" crypto assets have comes from exchanges that will trade them for fiat. If crypto holders stop trusting exchanges and pull all their assets that will cause the exchanges to fail and those assets will then be worth nothing. On the other side if exchanges try to earn the trust of holders by becoming "fully transparent" it will be revealed that there's not nearly enough fiat reserves to support the current valuations. (It does no good for Binance to prove they have a reserve of $18B of Tether to back the $18BN BUSD marketcap if turns out Tether is actually mostly backed by Bitcoin that only has a USD value because it can be traded for BUSD...)
5) Binance does significant money laundering for Iran and Russia, so any complete picture of their balance sheet would invite sanctions and international retribution.
For me, it's the ruthlessness of dumping all the FTT tokens they had to crash FTX to buy it (which went pear shape once they saw FTX's books) makes me think that they're probably not in a strong of a position as they say they are. We see this all the time. Exchanges saying they're strong and assets are safe until suddenly a few hours later they're not.
I don't ever entrust any exchange with my crypto. That being said, this episode will be a far better test of Binance's solvency than any audit. The proof is in the pudding. Either they have the reserves to cover the withdrawals or they go belly up.
Any investor who believes any exchange has the assets they say it does deserves to lose their money.
It takes a special kind of ignorant blindness not to see that "reserves" are all based on fake, wash-trade inflated cryptocurrency valuation, and it's all a house of cards. Like FTX. Like all of them.
If you have assets in any* exchange, get them out now. Using regulated exchanges defeats the whole point. Fiat transaction fees are lower / nonexistent compared to CC ones so if you want to gamble on the relative value of something just stick to the stock market, and if you want to send currency on something that is regulated by a government anyways, might as well use Fiat.
The only thing regulated exchanges do is profit by losing you value via fees and then some more via taxes while carrying risks of being rugged or having "your" assets frozen. Just... why?
Even an audited exchange like Coinbase that is trying to do everything right is still self reporting loses like $430M in quarter 1 of 2022 just by operating their business correctly.
Not your keys, not your crypto. Anyone storing their crypto on any exchange has this risk.
For many users of these exchanges their entire interest in crypto is speculation/trading, which requires them to store their crypto with an exchange so they can trade it because the costs associated with transferring to and from the exchange repeatedly would be prohibitive.
For now at least with Coinbase it is the investors funds at risk, not the customers funds. And that example shows how hard it is to run such a business profitably.
Mazars is likely wondering if they are going to be the next Arthur Andersen before this is all over. Good luck finding another firm when one of the top firms in the world drops you like a hot potato.
They haven't done anything wrong AFAIK; they didn't sign off on an audit, and withdrew, which is the reality of many smaller accounting practices taking on unfamiliar clients.
Arthur Anderson knowingly fudged the numbers at Enron, and provided both accounting and consulting services, which was a big conflict of interest. The consulting arm came up with new type of revenue opportunities (energy contracts), and the accounting arm cooked the books to show that these were profitable.
This feels a lot like how a credit crunch happens with regular money.
"Coins you own keys to = Coins in some online wallet = coins on exchanges = coins you lent out for interest" is the assumption everyone makes. They're all different types of assets but normal market conditions create the illusion they're all one and the same. There's 1 <-> 1 exchange possible, you can easily move coins from an exchange to your wallet, so they must be the same right? No.
When shit hits the fan, all those links break down and then there's no convertibility. Only what you really own is what you own.
With normal money, atleast there's Fed so they can actually do something about it and stop the links from breaking down completely, here there's no backstop.
Binance is China-owned so there's no problems, all criminal allegations are false, company is in great shape, and customer's assets are safe. What about Coinbase?
Looks like someone external does an audit(1), and then the auditor creates a Merkle tree which you can then validate (by a Markle leaf which you can access from your account).
Specifically for Crypto.com the auditors:
> obtained and inspected the scripts used by management to extract the Customer Liability Report from the database. Based on management’s explanation of the various parameters we ensured that the logic and the parameters are designed to extract a complete and accurate listing of client liability balances of the In-Scope Assets as at 00:00:00 UTC on 7 December 2022 while excluding any company internal accounts. It was found that the script was queried against the latest production data at the time of the data extract, which showed latest updated
time as of 23:59:59 UTC on 6 December 2022. We observed management access the
database and execute the scripts to extract the relevant data from the database. We
subsequently obtained the data produced from management (i.e. the Customer Liability
Report) and performed a row count and sum check on the data set. We did not identify any
discrepancies based on the row count and sum check performed.
> Using the Mazars’ Silver Sixpence Merkle Tree Generating tool, we aggregated the client data obtained from management in this procedure and computed the Merkle Root Hash. The Hash for the Merkle Root based on the information supplied in procedure 6 is e535cf418ab603cc4b338069a814037d53 c50bf37dc5776631f3d9c3110e08af
So you do still have to trust the audit, and assume no foul-play, because I think this just shows that your balance was included in the audit (as a liability). I believe this just stops Binance from being able to hide customer liabilities from Mazars.
* (1) In Binance's case this wasn't actually an audit, and Mazars did this piece of work with Binance assuming good-faith according to processes mutually agreed between Mazars and Binance. As per the Mazars disclaimer, "This AUP engagement is not an assurance (financial audit) engagement. Accordingly, we do not express an opinion or an assurance conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported". I would note that IMO the Binance page does use the word "Auditor" a lot on the PoR page which might be slightly misleading (they are an auditor, but they aren't financially auditing Binance...?).
The seem to be banks and exchanges. NYSE and Nasdaq are exchanges but don't hold customer funds they execute trades and that is it. These crypto exchanges are more like banks...and that is the problem. Until banks allow crypto accounts and connection to exchanges this will keep happening.
We will end up using good old banks to hold those assets… at least the regulations make them solvent.
We need to read history and see what happened when the banks weren’t regulated enough and we are letting the crypto zoo run free and bankrupt many people.
Such a bliss the “we don’t need traditional ecosystem to thrive”.
I know how this is going to end, we will replicate the finance ecosystem into the cryptosystem.
I still remember the “don’t be evil” slogan in google, let’s give random people the power to store all our crypto investment and let’s see what happens…
Why doesn't Binance flex and encourage a complete withdrawal by say Jan 1? Wouldn't that kind of power move boost its reputation above all competitors?
Any firm that survive the current ?recession? will have significantly more chance of surviving and passing the shivers. Maybe the next 6 months or so is critical for Binance or any other central wallet/exchange since people are on the edge.
[+] [-] CharlesW|3 years ago|reply
[+] [-] Animats|3 years ago|reply
Possibilities:
1) They're insolvent. Liabilities exceed assets. (Like FTX.)
2) Their accounting is so screwed up they can't produce a balance sheet. (Like FTX).
3) They have a large number of interconnected corporate entities and nobody has the big picture. (Like FTX).
4) They have enough assets on the books to look solvent, but many of those assets are overvalued or internal transactions. (Like FTX).
OK, crypto people. Full GAPP audit or we all assume you're broke.
If you have assets in an un-audited exchange, get them out now.
[+] [-] jefftk|3 years ago|reply
FTX passed a GAAP audit and was still broke. Safer just to take custody of your coins while your still can.
2021-08-27: "Both FTX and FTX.US have completed requirements to pass the US Generally Accepted Accounting Principles (GAAP) audit" https://blockworks.co/news/ftx-joins-coinbase-kraken-with-us...
[+] [-] femto113|3 years ago|reply
This is Mexican standoff. The only "value" crypto assets have comes from exchanges that will trade them for fiat. If crypto holders stop trusting exchanges and pull all their assets that will cause the exchanges to fail and those assets will then be worth nothing. On the other side if exchanges try to earn the trust of holders by becoming "fully transparent" it will be revealed that there's not nearly enough fiat reserves to support the current valuations. (It does no good for Binance to prove they have a reserve of $18B of Tether to back the $18BN BUSD marketcap if turns out Tether is actually mostly backed by Bitcoin that only has a USD value because it can be traded for BUSD...)
[+] [-] choppaface|3 years ago|reply
5) Binance does significant money laundering for Iran and Russia, so any complete picture of their balance sheet would invite sanctions and international retribution.
https://www.reuters.com/business/finance/exclusive-crypto-ex...
[+] [-] that_guy_iain|3 years ago|reply
[+] [-] jacquesm|3 years ago|reply
[+] [-] loeg|3 years ago|reply
[+] [-] StanislavPetrov|3 years ago|reply
[+] [-] stevebmark|3 years ago|reply
It takes a special kind of ignorant blindness not to see that "reserves" are all based on fake, wash-trade inflated cryptocurrency valuation, and it's all a house of cards. Like FTX. Like all of them.
[+] [-] raven105x|3 years ago|reply
The only thing regulated exchanges do is profit by losing you value via fees and then some more via taxes while carrying risks of being rugged or having "your" assets frozen. Just... why?
[+] [-] janejeon|3 years ago|reply
[+] [-] bushbaba|3 years ago|reply
[+] [-] godzillabrennus|3 years ago|reply
Not your keys, not your crypto. Anyone storing their crypto on any exchange has this risk.
[+] [-] jeffreyrogers|3 years ago|reply
[+] [-] jacquesm|3 years ago|reply
[+] [-] grey-area|3 years ago|reply
What are your keys worth if the price of Bitcoin is close to zero?
[+] [-] bufferoverflow|3 years ago|reply
[+] [-] nly|3 years ago|reply
[+] [-] MuffinFlavored|3 years ago|reply
what % of BTC is held in binance / crypto.com / coinbase?
if one of them fails/has an issue, how much more can BTC fall and then never recover?
what are the % chances something good happens to one of those exchanges and crypto value/demand goes up?
what are the % chances the inverse/opposite happens and crypto goes even lower?
[+] [-] gjvc|3 years ago|reply
Coinbase stock is going to zero.
[+] [-] dicomdan|3 years ago|reply
[+] [-] jacquesm|3 years ago|reply
[+] [-] rchaud|3 years ago|reply
Arthur Anderson knowingly fudged the numbers at Enron, and provided both accounting and consulting services, which was a big conflict of interest. The consulting arm came up with new type of revenue opportunities (energy contracts), and the accounting arm cooked the books to show that these were profitable.
[+] [-] ryloric|3 years ago|reply
"Coins you own keys to = Coins in some online wallet = coins on exchanges = coins you lent out for interest" is the assumption everyone makes. They're all different types of assets but normal market conditions create the illusion they're all one and the same. There's 1 <-> 1 exchange possible, you can easily move coins from an exchange to your wallet, so they must be the same right? No.
When shit hits the fan, all those links break down and then there's no convertibility. Only what you really own is what you own.
With normal money, atleast there's Fed so they can actually do something about it and stop the links from breaking down completely, here there's no backstop.
[+] [-] not_enoch_wise|3 years ago|reply
Someone got a set of pearls I can clutch?
https://fortune.com/crypto/2022/12/12/binance-investigation-...
[+] [-] unknown|3 years ago|reply
[deleted]
[+] [-] dicomdan|3 years ago|reply
[+] [-] funstuff007|3 years ago|reply
https://finance.yahoo.com/quote/BNB-USD/
[+] [-] belltaco|3 years ago|reply
How does this even work?
[+] [-] Closi|3 years ago|reply
Specifically for Crypto.com the auditors:
> obtained and inspected the scripts used by management to extract the Customer Liability Report from the database. Based on management’s explanation of the various parameters we ensured that the logic and the parameters are designed to extract a complete and accurate listing of client liability balances of the In-Scope Assets as at 00:00:00 UTC on 7 December 2022 while excluding any company internal accounts. It was found that the script was queried against the latest production data at the time of the data extract, which showed latest updated time as of 23:59:59 UTC on 6 December 2022. We observed management access the database and execute the scripts to extract the relevant data from the database. We subsequently obtained the data produced from management (i.e. the Customer Liability Report) and performed a row count and sum check on the data set. We did not identify any discrepancies based on the row count and sum check performed.
> Using the Mazars’ Silver Sixpence Merkle Tree Generating tool, we aggregated the client data obtained from management in this procedure and computed the Merkle Root Hash. The Hash for the Merkle Root based on the information supplied in procedure 6 is e535cf418ab603cc4b338069a814037d53 c50bf37dc5776631f3d9c3110e08af
So you do still have to trust the audit, and assume no foul-play, because I think this just shows that your balance was included in the audit (as a liability). I believe this just stops Binance from being able to hide customer liabilities from Mazars.
* (1) In Binance's case this wasn't actually an audit, and Mazars did this piece of work with Binance assuming good-faith according to processes mutually agreed between Mazars and Binance. As per the Mazars disclaimer, "This AUP engagement is not an assurance (financial audit) engagement. Accordingly, we do not express an opinion or an assurance conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported". I would note that IMO the Binance page does use the word "Auditor" a lot on the PoR page which might be slightly misleading (they are an auditor, but they aren't financially auditing Binance...?).
[+] [-] xlbuttplug|3 years ago|reply
[+] [-] gabcoh|3 years ago|reply
[+] [-] ProAm|3 years ago|reply
Matt Damon tells them.
[+] [-] flotzam|3 years ago|reply
[+] [-] dd36|3 years ago|reply
[+] [-] the_mitsuhiko|3 years ago|reply
[+] [-] ta988|3 years ago|reply
[+] [-] dougSF70|3 years ago|reply
[+] [-] professorTuring|3 years ago|reply
We need to read history and see what happened when the banks weren’t regulated enough and we are letting the crypto zoo run free and bankrupt many people.
Such a bliss the “we don’t need traditional ecosystem to thrive”.
I know how this is going to end, we will replicate the finance ecosystem into the cryptosystem.
I still remember the “don’t be evil” slogan in google, let’s give random people the power to store all our crypto investment and let’s see what happens…
[+] [-] pfoof|3 years ago|reply
[+] [-] fritzo|3 years ago|reply
[+] [-] AceJohnny2|3 years ago|reply
We used to call those a "bank run".
[+] [-] dang|3 years ago|reply
French accounting firm Mazars is pausing all its work with crypto firms - https://news.ycombinator.com/item?id=34026826 - Dec 2022 (39 comments)
[+] [-] fredgrott|3 years ago|reply
First implied statement: 1. Has funds to buy FTX
Second implied statement: 2. has funds to send back due to fraud conveyance claw back
Notice the pattern yet as not one implied statement has been stated as a direct statement.
SBF showed the same amount of obfuscation.
Not good folks.
[+] [-] tomjpandolfi|3 years ago|reply
Binance is shady, but a lot of people in this thread are falling for bear market panic seekers.
[+] [-] firstSpeaker|3 years ago|reply
[+] [-] protoc|3 years ago|reply
[+] [-] jcpham2|3 years ago|reply
Nothing like a good ‘ol stress test
[+] [-] paulpauper|3 years ago|reply