Mazars suspends all work with crypto clients, including Binance, Crypto.com

Accounting firm Mazars Group has suspended all work with its crypto clients. The decision to cut ties with Binance, KuCoin and Crypto.com comes just after the global accounting firm issued “proof of reserve” reports for several digital asset exchanges.

The move comes as major cryptocurrency exchanges look to prove their solidity, showing they have enough money to cover customer withdrawals. The CEOs of Binance and Crypto.com have tried to separate their own business practices from what happened at FTX, which has been accused of illegally using customer deposits for years before filing for bankruptcy. Its founder Sam Bankman-Fried faces several counts of fraud and money laundering.

Mazars fired the Trump Organization as a client in February, citing a lack of reliability in the organization’s accounts.

Mazars Group said in a statement to CNBC that it had “suspended its activity related to the provision of Proof of Reserve reports for entities in the cryptocurrency sector due to concerns regarding the way these reports are understood by the public.”

The statement added that Mazars’ proof of reserve reports are “conducted in accordance with reporting standards relevant to an agreed procedure report.”

“They constitute neither an assurance nor an audit opinion on the subject matter. Instead, they report limited findings based on agreed procedures performed on the subject matter at a historical point in time,” the statement continued.

A spokesperson from Binance, the world’s largest crypto exchange, told CNBC in a statement that “Mazars has indicated that it will temporarily pause work with all of its crypto clients globally, which includes Crypto.com, KuCoin and Binance.”

“Unfortunately, this means we will not be able to work with Mazars at this time,” Binance said.

Both bitcoin and Binance’s BNB token took a dip on the news, with bitcoin initially falling nearly 3% and Binance’s native token falling nearly 5.5%.

Mazars’ South African division published a five-page “proof of reserves” for Binance on December 7, but the report is no longer available on the firm’s website as of Friday morning. Contrary to standard audits, the “proof of reserve” for Binance consisted of bitcoin only. The report did not show liabilities for Binance’s lending arm. Binance CEO Changpeng Zhao has often said that the company itself has no debt.

On December 9, Crypto.com published a proof of reserves audited by Mazars, confirming that customer funds were held on a one-to-one basis, meaning all deposits were 100% backed by Crypto.com’s reserves. A spokesperson for the exchange reiterated that the firm had “successfully” completed its recent proof of reserves in partnership with Mazars, and that the accountancy firm had “provided independent verification of our secure on-chain digital assets that matched our customer balances 1:1.”

Crypto.com added that customers can verify their balance on the site. A spokesperson said the company will “continue to engage with reputable audit firms in 2023 and beyond” as they “seek to increase transparency across the industry.”

KuCoin said the proof of reserve report had already been provided by Mazars. “In the future, we are open to working with all leading and reputable audits to provide the third-party verification report,” said a KuoCoin spokesperson.

Meanwhile, Ernst & Young, PricewaterhouseCoopers, Deloitte and KPMG – collectively called accounting’s Big Four – have not taken steps to drop their crypto clients. Coin base, for example, is a client of Deloitte. Tether uses Moore Cayman.

The Big Four did not immediately respond to CNBC’s request for comment.

In an interview with CNBC’s “Squawk Box” on Thursday, Zhao said Binance is working with auditing firms, though he did not name which ones. He added that “interestingly, a lot of audit firms are a little afraid of working with crypto companies.”

“There are a few audit firms that audited FTX and they got burned because they give the stamp of approval, and I don’t know how they did the audits. But audits don’t reveal all problems,” Zhao continued, noting that many of these firms “don’t know how” they will audit crypto changes.

“They don’t know how to audit user assets, different blockchains,” he said.

This news is in development. Please check back for updates.