Binance users’ Bitcoin accounts are 101% secured with BTC: Mazars

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(Kitco News) – South African auditing firm Mazars published its long-awaited report on Wednesday claiming that Binance, the world’s largest cryptocurrency exchange, has direct control over 575,742.42 Bitcoins (BTC) worth over $9.6 billion at the time of publication, and the Bitcoin holdings listed in its customers’ accounts are fully secured by these BTC.

Mazars wrote that it was conducting an agreed upon procedure (“AUP”) assignment, which means to “perform the procedures agreed upon with Binance and report the findings.” They said they are not making any claims regarding the appropriateness of the AUP and that “the AUP engagement is not an attestation engagement. Accordingly, we are not expressing an opinion or an assurance conclusion. Had we performed additional procedures, other matters may have come to our attention attention that would have been reported.”

The AUP engagement defined the scope of assets as “customers’ spot, options, margin, futures, financing, borrowing and accrual accounts for bitcoin (“BTC”) and packaged bitcoin (“BBTC” and “BTCB”) held on Bitcoin, Ethereum, BNB Chain and Binance Smart Chain blockchains” as of 23:59:59 UTC on 22 November 2022.

Mazars wrote that it obtained Asset Balance Reports for In-Scope Assets from management, along with a full list of all assets’ public keys and addresses. They also independently obtained the nominal balance of the keys and addresses for the corresponding time.

“We compared the total nominal balance of each blockchain’s In-Scope Asset […] to the obtained balance reports […] and found no deviation greater than 1%,” they wrote. “We found that Binance was 101% secured.”

Mazars also outlined a series of procedures they used to independently verify that the Bitcoin listed in the Asset Balance Reports was fully held by Binance by requesting that the exchange move the BTC listed to specific addresses at their request. One of these moves was discovered on the chain and caused widespread concern on Nov. 28, prompting Binance CEO Changpeng Zhao (CZ) to issue an explanation to reassure customers and the broader crypto market.

This is part of the Proof-of-Reserve audit. The auditor requires us to send a specific amount to ourselves to show that we control the wallet. And the rest goes to a Change Address, which is a new address. In this case Input tx is large and so is Change. Ignore FUD! pic.twitter.com/2NkH5L5J9j

— CZ 🔶 Binance (@cz_binance) 28 November 2022

The Mazars report is Binance’s attempt to make good on CZ’s November 8 promise to independently prove the exchange’s reserves after the collapse of rival exchange FTX, which allegedly lent virtually all of its high-value securities to Alameda Research, which then lost it in risky, highly leveraged trades.

On November 10, Binance published the crypto platform’s hot and cold wallet addresses and on-chain activity. They said in a statement that the backup data represents Binance’s “ongoing commitment to transparency” and referred to it as “a starting point as we work to create a Merkle tree POF” to be published in the coming weeks.

With the completion of Mazar’s AUP engagement, customers no longer need to take Binance’s claims of healthy reserves and 1-1 support from BTC holdings on trust.