Auditor Mazars Pauses All Work For Binance, Other Crypto Clients

Golden Bitcoins
Golden Bitcoins. Caiaimage/Adam Gault / Getty Images

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.

Key Takeways

  • Mazars Group suspended all work with its crypto clients, including Binance, KuCoin, and Crypto.com.
  • Earlier this month, the accounting firm released proof-of-reserve reports for the crypto exchanges.
  • According to Mazars, the proof-of-reserves reports it has published so far have not been sufficient to assure markets. The reports are no longer available on the 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.

Article Sources
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  1. Reuters. “Auditing firm Mazars pauses work for Binance, other crypto clients

  2. KuCoin. ''Mazars releases KuCoin’s verification PoR report, concluded that BTC, ETH, USDT and USDC reserves are overcollateralized''
  3. CoinDesk. ''Binance Proof-of-Reserves Auditor Mazars Pauses All Work for Crypto Clients''

  4. Bloomberg. “Accountant That Vetted Binance Reserves Halts Crypto Work

  5. TechCrunch. ''Can proof of reserves prevent future crypto exchange collapses?''

  6. The Daily Hodl. ''Crypto.com CEO Explains How Exchange Is Different From FTX Amid Push for Reserves Transparency''
  7. Reuters. ''Trump's longtime accounting firm cuts ties, cannot stand behind statements -filing''
  8. CoinMarketCap. ''KCS''

  9. CoinMarketCap. ''BNB''

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