Binance’s efforts to increase the transparency of its holdings have also raised red flags in the cryptocurrency exchange’s finances, according to accounting and finance experts. consulted By The Wall Street Journal.
As noted by a former member of the Financial Accounting Standards Board (FASB) and an investment manager, the report released by the audit firm Mazars lacks information on the quality of internal controls and how Binance’s systems work, as it does not instill confidence in investors regarding the exchange’s finances. liquidate assets to pay off margin loans.
Another red flag raised by the paper’s sources is the lack of information about Binance’s corporate structure. According to the report, Binance’s chief strategy officer Patrick Hillmann could not name Binance’s parent company because Binance has been undergoing a corporate restructuring for nearly two years.
Differences between common Bitcoin obligations are also highlighted. Stock proof of stock shows Excluding assets given to users through loans or margin accounts, Binance is 97% secured, which means that a 1:1 ratio of reserves to client assets is not achieved. Graves’ letter says of the difference:
“We found that Non-Covered Assets lent by Binance customers through the margin and credit service offering were 97% pledged, excluding Non-Commissioned Assets pledged as collateral, resulting in negative balances on the Customer Liability Report. We found Binance to be 101% collateralized, including loans over-collateralized by Covered Assets and Non-Covered Assets issued to customers through margin.”
John Reed Stark, senior lecturer at Duke University Law School and former head of the Securities and Exchange Commission’s Office of Internet Protection, reported In a Twitter post:
“Binance’s ‘backup evidence’ report does not address the effectiveness of internal financial controls, does not express an opinion or result of assurance, and does not guarantee the numbers. I have worked at the SEC for 18+ years. This is how I identify a red flag.”
Following the collapse of FTX, Binance last month released a proof-of-stake system that allows users to verify their assets using a Merkle tree. However, such was the initiative labeled “pointless” by opponents as it cannot include liabilities.
Mazars released an audit report on Binance’s Bitcoin reserves in December. 7. According to an international audit firm, the cryptocurrency exchange has control over 575,742.42 bitcoins owned by its clients, worth $9.7 billion at the time of reporting. For the methodology, “Binance was 101% secure,” the company said.
The scope of the report includes clients’ spot, options, margin, futures, financing, credit and profit accounts for Bitcoin and packaged Bitcoin (WBTC). In addition to the Bitcoin network, BTC wrapped in Ethereum, BNB Chain and BNB Smart Chain were also included in the survey. This was reported by Cointelegraph.
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