Cryptocurrency: Bogus "Audits", Corrupt Exchequers... Drive Adoption of Old School P2P Tx and DEX

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Binance's Alleged Crypto Audit Failed, Not Even Its Auditor Would Vouch For It

Authored by Mike Shedlock via MishTalk.com,

Binance says an audit shows proof of reserves of customer funds. But
its auditor will not vouch for the reserves nor the methodology
demanded by Binance...

"CZ" Image likeness courtesy of Coin Telegraph article below
Binance's Proof of Reserves Statement

    When we say Proof of Reserves, we are specifically referring to
those assets that we hold in custody for users. This means that we are
showing evidence and proof that Binance has funds that cover all of
our users assets 1:1, as well as some reserves.

    When a user deposits one Bitcoin, Binance's reserves increase by
at least one Bitcoin to ensure client funds are fully backed. It is
important to note that this does not include Binance’s corporate
holdings, which are kept on a completely separate ledger.

    What this means in actual terms is that Binance holds all user
assets 1:1 (as well as some reserves), we have zero debt in our
capital structure and we have made sure that we have an emergency fund
(SAFU fund) for extreme cases.

The above Proof of Reserves Claim is interesting. If you have assets
1:1 then you should not need an emergency fund for extreme cases.
Audit by Whom?

The pseudo audit was by Mazars, a mid-tier global accounting firm
according to the Wall Street Journal.

    Its U.S. arm Mazars USA previously worked for former President
Donald Trump’s company. Earlier this year Mazars USA said it would
withdraw from its work for Mr. Trump’s company and could no longer
stand by financial statements it had previously prepared.

    Binance didn’t specify which of Mazar’s offices would be doing the
verification of the reserves. A Mazars spokesman declined comment.

Mystery Finances

After the collapse of Crypto exchange FTX, Binance Is Trying 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 representation regarding the
appropriateness” of the procedures.

    The report didn’t show total assets or total liabilities. Rather,
its scope was limited only to bitcoin assets and bitcoin liabilities.
Binance said it would begin releasing information about other crypto
tokens in the coming weeks.

    “It’s important for us to show users that the coffers are not
bare, like at FTX,” said Binance’s chief strategy officer, Patrick
Hillmann.

    In an interview, Binance’s Mr. Hillmann said the Mazars letter
covered all the bitcoin assets and bitcoin liabilities for the
company’s Binance.com exchange—although the Mazars letter itself
didn’t say this.

    During the interview, Mr. Hillmann also at times referred to the
work performed by Mazars as an “audit.” Asked about the
appropriateness of Binance’s use of the term “audit” in the news
release and elsewhere, Mr. Hillmann said: “We’re talking about a
review of our assets in custody.” He also said: “I would just say
we’re parroting others’ descriptions of this as an independent audit.”

    Other basic information about Binance is lacking. Mr. Hillmann
said he couldn’t provide the name of Binance’s ultimate parent company
because Binance over the past year and a half has been in the process
of a broad corporate reorganization.

First Rule in Truth Telling

The first rule in telling the truth is "Don't lie".

The second rule in truth telling is to not sound like you are hiding
something. This is especially important when overall trust is in the
gutter anyway.

This was not an independent audit. Mazars did not describe it that way
and the company would not certify the methodology it used. Heck,
neither Mazars nor Binance disclosed the precise methodology.

Who was Hillmann parroting in describing the procedure as a audit?
Sadly no one asked, but my bet is Hillman was parroting himself or
someone else at Binance.

Nor would Binance disclose its parent company due to a 1.5 year
reorganization. WTF?
Potential Kiting

    @cz_binance talk is the cheapest and not so sweet. His word is mud

    Binance in Hot Water After Moving $2.7B Out of Proof of Reserves
Wallethttps://t.co/fv1RamYiSY https://t.co/NfGf3QPzBB
    — Nouriel Roubini (@Nouriel) November 18, 2022

Binance is receiving flak from the crypto community after moving $2.7
billion out of its proof-of-reserves wallet. The exchange responded,
saying the move was to a TRX cold wallet.

The procedure was even more bizarre because it comes on the heels
contradictory statements by Binance CEO Changpeng “CZ” Zhao.

    If an exchange have to move large amounts of crypto before or
after they demonstrate their wallet addresses, it is a clear sign of
problems. Stay away. Stay #SAFU. 🙏
    — CZ 🔶 Binance (@cz_binance) November 13, 2022

"If an exchange have to move large amounts of crypto before or after
they demonstrate their wallet addresses, it is a clear sign of
problems. 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 declared that it’s bad news when exchanges
move large amounts of crypto to prove their wallet address.

    Cryptocurrency exchange Binance is moving large amounts of
cryptocurrency as part of its proof-of-reserve (PoR) audits, according
to its CEO, Changpeng “CZ” Zhao.

    “The auditor requires us to send a specific amount to ourselves to
show we control the wallet. And the rest goes to a change address,
which is a new address. In this case, the input tx is big, and so is
the change."

Wait! 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 says the auditor demanded this but Mazars, the alleged auditor,
does not call it an audit.

    Mazars would make no representation regarding the
"appropriateness” of the procedures.

    Mazars said the  “agreed-upon procedures” were requested by
Binance not by Mazars.

Not to worry

    1 BTC = 1 BTC

    127,000 BTC = 127,000 BTC (unless they have been counted multiple times)

Meanwhile please note Global Squabbles Erupt Around the World Over the
Remaining Crypto Assets of FTX