“CZ” Image likeness courtesy of Coin Telegraph article below
Binance Proof of Reserve Statement
When we say proof of reserves, we are specifically referring to the assets we hold on deposit for users. This means that we show proof and evidence that Binance has funds that cover all of our users’ assets 1:1, plus some reserves.
When a user deposits one bitcoin, Binance’s reserves increase by at least one bitcoin to ensure the client’s funds are fully collateralized. Importantly, this does not include Binance holdings, which are held in a completely separate ledger.
What this means in practice is that Binance owns all user assets 1:1 (along with some reserves), we have no debt in our capital structure, and we’ve made sure we have a fund of emergency (SAFU funds) for extreme cases .
What precedes Request for proof of reservations is interesting. If you have 1:1 assets, you shouldn’t need an emergency fund for extreme cases.
Audit by whom?
The pseudo audit was carried out by Mazars, a medium-sized global accounting firm according to the the wall street journal.
Its American branch Mazars USA previously worked for former President Donald Trump’s company. Earlier this year, Mazars USA said it would step back from working for Mr Trump’s company and could no longer complies with the financial statements it had previously prepared.
Binance did not specify which of Mazar’s offices would perform the reserve verification. A Mazars spokesperson declined to comment.
Mystery finance
After the collapse of Crypto exchange FTX, Binance Tries To Calm Investors, But Its Finances Remain A Mystery.
- Mazars said it performed its work using “agreed-upon procedures” requested by Binance and that “we make no representations as to the adequacy” of the procedures.
- The report did not show total assets or total liabilities. Instead, its scope was limited only to bitcoin assets and liabilities. Binance said it will start releasing information on other crypto tokens in the coming weeks.
- “It is important for us to show users that the vaults are not empty, like at FTX,” said Binance Chief Strategy Officer Patrick Hillmann.
- In an interview, Binance’s Mr. Hillmann said that Mazars’ letter covered all bitcoin assets and liabilities for the company’s Binance.com exchange, although Mazars’ letter itself did not say so.
- During the interview, Hillmann also sometimes referred to the work Mazars did as an “audit.” Asked about the relevance of Binance’s use of the term “audit” in the press release and elsewhere, Hillmann said, “We’re talking about a review of our custodial assets.” He also said: ‘I would just say that we replicate other people’s descriptions as an independent audit.
- Other basic information about Binance is lacking. Mr. Hillmann said he could not provide the name of Binance’s ultimate parent company because Binance over the past year and a half has been in the process of extensive corporate reorganization.
First rule for telling the truth
The first rule for telling the truth is “Don’t lie”.
The second rule of truth is not to give the impression that you are hiding something. This is especially important when overall trust is in the gutter anyway.
It was not an independent audit. Mazars didn’t describe it that way, and the company wouldn’t certify the methodology it used. Heck, neither Mazars nor Binance disclosed the precise methodology.
Who did Hillmann repeat when describing the procedure as an audit? Sadly no one asked, but I bet Hillman was parroting himself or someone else at Binance.
Binance would also not disclose its parent company due to a year-and-a-half-long reorganization. WTF?
Potential Kite
Scroll to continue
Binance is receiving criticism from the crypto community after withdrawing $2.7 billion from its proof-of-reserves wallet. The exchange responded, saying the move was for a TRX cold wallet.
The procedure was even more bizarre as it follows conflicting statements from Binance CEO Changpeng “CZ” Zhao.
“If an exchange needs to move large amounts of crypto before or after demonstrating its wallet addresses, that’s a clear sign of trouble. Stay away. Stay #SAFU.”
Binance CEO Explains 127K BTC Transfer
Please consider the Coin Telegraph Binance CEO Explains 127K BTC Transfer.
A few weeks ago, CZ said it’s bad news when exchanges move large amounts of crypto to prove their wallet address.
Cryptocurrency exchange Binance moves large amounts of cryptocurrency as part of its proof of reserve (PoR) audits, according to its CEO, Changpeng “CZ” Zhao.
“The verifier asks us to send us a specific amount to show that we control the wallet. And the rest goes to a change address, which is a new address. In this case, the input tx is important, as is the change.”
Expect! What?
- CZ says it’s bad news when exchanges move large amounts of crypto to prove their wallet address.
- CZ moves 127,000 Bitcoins
- CZ claims that the auditor required this, but Mazars, the alleged auditor, does not call it an audit.
- Mazars would make no representations as to the “relevance” of the proceedings.
- Mazars said the “agreed-upon procedures” were requested by Binance, not Mazars.
Do not worry
- 1 BTC = 1 BTC
- 127,000 BTC = 127,000 BTC (unless counted multiple times)
In the meantime, please note Global feuds erupt around the world over FTX’s remaining crypto assets
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