Saving the market: Binance Bitcoin reserves are overinsured

• Mazars reports on Binance Bitcoin reserves and declared oversecurity.
• Binance’s audits are fake, unofficial and more worthless than Tether’s report says, Francine McKenna.

According to Mazars, an international audit, tax and advisory firm, security analysis shows that Binance Bitcoin reserves are oversecured. The report was announced after Mazars conducted a proof-of-reserves and proof-of-liabilities verification on the world’s largest crypto exchange by trading volume. The snapshot of total reserves and liabilities was taken on 22 November 2022 at 23:59:59 UTC.

In a post-assessment statement, Mazars declared:

At the time of the assessment, Mazars observed Binance-controlled assets in excess of 100% of their total platform liabilities.

Mazars calculated and verified Binance assets through a Merkle-Proof. After conducting the assessment, Mazars discovered that Binance had a 101 percent safety ratio in its Bitcoin reserves. However, Mazars’ report clarified that customers’ Bitcoin is secured on the Binance blockchain and the cryptocurrency exchange currently controls it. The assessment included all margins and borrowings of In-Scope assets used as Out-Of-Scope assets. Binance’s assessment was triggered by the collapse of FTX, one of Binance’s top competitors, due to liquidity crises.

Last month, the cryptocurrency exchange announced the launch of its Proof of Reserves (PoR) system to provide more transparency about users’ funds. In the same announcement, Binance mentioned that the Proof of Reserves (PoR) system would begin with BTC and add other cryptocurrencies later.

After analysis drama: Mazar’s report on Binance Bitcoin reserves is not true

Francine McKenna, a lecturer in financial accounting at The Wharton School at the University of Pennsylvania, has declared that Mazar’s assessment is not an official audit. She said:

They did a comparison of balances per public key address from a list they got from management. They did not compare balances in independent banks or custodians or depositories. This is more worthless than even the Tether or USDC report.”

In September, the US Securities and Exchange Commission (SEC) charged Friedman LLP with “serial violations of the federal securities laws” and “improper professional conduct”. According to the SEC’s investigation, the New York-based accounting firm conducted audits of two publicly traded companies, iFresh, a Chinese grocery store, and another undisclosed company. The auditors were fined $1 million. Friedman LLP was the auditor for Tether from May 2017 to January 2018. In August, Tether replaced Friedman LLP with BDO Italia.

The security analysis conducted by Mazars covered Binance’s total reserves and liabilities. These customers’ assets specifically included the customers’ spots, options, margins, futures, financing, loans and servant accounts. The cumulative amount of wrapped Bitcoin and Bitcoin on Binance reserves was 575742.4228. Customers held their assets on the Bitcoin, Ethereum, BNB Chain and Binance Smart Chain blockchains.