Auditor Mazars Pauses All Work For Binance, Other Crypto Clients

Mazars Group, an accounting firm, stopped vouching for assets that crypto firms hold in reserve, less than two weeks after saying that Binance was over-collateralized in a report that's no longer on the company's website.

Proof-Of-Reserve Is Not Sufficient

Earlier this month, the auditor found that KuCoin's crypto assets reserves were all overcollateralized. Similarly, it reported that Crypto.com's reserves are fully backed 1:1. The reports are also no longer available on Mazar's website. 

According to Mazars, the proof-of-reserves reports it has published so far have not been sufficient to assure markets. A proof-of-reserve allows centralized exchanges to publicly prove their solvency and attest to the value of their reserves.

An email from the firm described intense media scrutiny as another concern. A Mazar's spokesperson said the suspension was limited to its provision of proof-of-reserves reports, citing “concerns regarding the way these reports are understood by the public.”

It has been argued that proof-of-reserves reports are not comparable to a full audit because they are limited to showing assets and not liabilities and instead serve as snapshots that check out client information.

Challenging Time For Crypto Firms

Mazars’ decision is a setback for an industry that’s been trying to bolster its credibility in the wake of several bankruptcies and the spectacular collapse of FTX. Cryptocurrency exchanges are proving their solvency and demonstrating they have adequate funds for customer withdrawals. The CEOs of Binance and Crypto.com are looking to differentiate their business practices from what happened at FTX.

The Bottom Line

Mazars, which earlier this year fired the Trump Organization as a client due to a lack of trustworthiness of financial statements, has now given a new challenge to crypto firms.

As a result of the news, Binance Coin (BNB), the native token of the exchange, fell 7.7%, trading around $243. KuCoin's native token, KCS, also dropped a bit, hovering around $6.5, according to CoinMarketCap.