According to Binance, an audit provides evidence of customer money reserves. However, its auditor would not attest to the approach or the reserves that Binance is demanding.
Proof of Reserves Statement for Binance
When we use the term "Proof of Reserves,"(1) we expressly mean the assets we keep in trust for our customers. By doing this, we are proving that Binance has sufficient cash to cover all of our users' assets in full and certain reserves.
To guarantee that client funds are completely supported, Binance's reserves grow by at least one Bitcoin for everyone that a customer puts. It's vital to note that Binance's business assets are not included in this. They are maintained on an entirely different ledger. In practice, this means that Binance owns all user assets 1:1, that our financial structure has no debt, and that we have ensured an emergency fund for catastrophic situations. The Proof of Reserves Claim mentioned above is intriguing. If your assets to liabilities are equal, you shouldn't require a reserve for unanticipated events.
Who has the audit reports?
According to the Wall Street Journal (2), Mazars, a mid-tier international accounting company, conducted the phony audit. Formerly employed by the business of former President Donald Trump was its American subsidiary, Mazars USA. Mazars USA announced earlier this year that it would stop working with Mr. Trump's business and would no longer support the prior financial statements it provided. The Mazar office would be doing the reserve verification was not made clear by Binance. A spokeswoman for Mazars declined to comment.
The Unknown Finances
Binance is attempting to reassure investors following the bankruptcy of the cryptocurrency exchange FTX (3), but the company's finances are still a mystery. In response to Binance's request, Mazars stated that it carried out the work using "agreed-upon processes" and that "we make no representation on the suitability" of the methods. Total assets or total liabilities were not included in the report. Instead, it was restricted to just bitcoin obligations and assets. In the upcoming weeks, Binance announced it would start disclosing details on other cryptocurrency tokens.
"We must demonstrate to people that the bank accounts are not empty, like at FTX," stated Patrick Hillmann, chief strategy officer of Binance.
The Mazars letter did not specifically state that it covered all of the bitcoin assets and liabilities for the company's Binance.com exchange, according to Mr. Hillmann of Binance in an interview. Mr. Hillmann occasionally referred to Mazars' work during the interview as "an audit."
When asked if Binance's use of the word "audit" in its news release and other places was acceptable, Mr. Hillmann responded, "We're talking about a review of our assets in custody." As for our repetition of other people's representations of this as an independent audit, he added:
"I would simply state that. There is a lack of other fundamental knowledge concerning Binance".
Mr. Hillmann claimed he could not disclose the identity of Binance's ultimate parent organization because, Over the past 15 months, Binance has undergone a comprehensive corporate restructure.