{"id":525219,"date":"2022-12-11T22:39:47","date_gmt":"2022-12-11T19:39:47","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/binances-proof-of-reserves-raises-red-flags-report\/"},"modified":"2022-12-11T22:39:47","modified_gmt":"2022-12-11T19:39:47","slug":"binances-proof-of-reserves-raises-red-flags-report","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/binances-proof-of-reserves-raises-red-flags-report\/","title":{"rendered":"# Binance&#8217;s proof-of-reserves raises red flags: Report"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a32a24949ead\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a32a24949ead\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/binances-proof-of-reserves-raises-red-flags-report\/#%E2%80%9D_Binances_proof-of-reserves_raises_red_flags_Report_%E2%80%9C\" >&#8221; Binance&#8217;s proof-of-reserves raises red flags: Report &#8220;<\/a><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Binances_proof-of-reserves_raises_red_flags_Report_%E2%80%9C\"><\/span>&#8221; Binance&#8217;s proof-of-reserves raises red flags: Report &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMTIvYjIwZWZjYWYtNWZlZC00NmI1LWJkODEtNTMzMGQzNWRhNzMwLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-30a6cf80>Binance&#8217;s efforts to improve transparency of its reserves also exposed red flags in the crypto exchange&#8217;s finances, according to accounting and financial specialists <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.wsj.com\/articles\/binance-is-trying-to-calm-investors-but-its-finances-remain-a-mystery-11670679351\">consulted<\/a> by The Wall Street Journal.\u00a0<\/p>\n<p>As noted by a former Financial Accounting Standards Board (FASB) member and investment manager, the report released by the audit firm Mazars does not bring investors confidence about the exchange&#8217;s finance as it lacks information related to the quality of internal controls and how its systems liquidate assets to cover margin loans. <\/p>\n<p>Another red flag raised by the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a>paper&#8217;s sources is regarding the lack of information about Binance&#8217;s corporate structure. As per the report, Binance\u2019s chief strategy officer, Patrick Hillmann, was unable to provide the name of Binance\u2019s parent company since it has been going through a corporate reorganization for almost two years.<\/p>\n<p>Differences between the total Bitcoin liabilities were also highlighted. The exchange&#8217;s proof-of-reserves <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/veritas.mazars.com\/binance\/Binance_POR_Report_7_December_2022.pdf\">shows<\/a> that Binance was 97% collateralized if excluded assets lended to users through loans or margin accounts, indicating that the 1:1 ratio of reserves to customer assets was not achieved. Mazars&#8217; letter states about the difference:<\/p>\n<blockquote><p>&#8220;We found that Binance was 97% collateralized without taking into account the Out-Of-Scope Assets pledged by customers as collateral for the In-Scope-Assets lent through the margin and loans service offering resulting in negative balances on the Customer Liability Report. With the inclusion of In-Scope Assets lent to customers through margin and loans which are overcollateralized by Out-Of-Scope Assets, we found that Binance was 101% collateralized.&#8221;<\/p><\/blockquote>\n<p>John Reed Stark, Senior Lecturing Fellow at Duke University School of Law and former chief at Office of Internet Enforcement for the Securities Exchange Commission (SEC), <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/JohnReedStark\/status\/1601760070806560768\">stated<\/a> in a <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">Twitter<\/a> post about Binance&#8217;s reserves:<\/p>\n<blockquote><p>&#8220;Binance\u2019s \u201cproof of reserve\u201d report doesn\u2019t address effectiveness of internal financial controls, doesn\u2019t express an opinion or assurance conclusion and doesn\u2019t vouch for the numbers. I worked at SEC Enforcement for 18+ yrs. This is how I define red flag.&#8221;<\/p><\/blockquote>\n<p>Following FTX collapse, Binance released last month a proof-of-reserves system that allows users to verify their assets using a Merkle tree. The initiative, however, was labeled &#8220;pointless&#8221; by rivals as it failed to include liabilities.\u00a0<\/p>\n<p>Mazars disclosed its audit report on Binance&#8217;s Bitcoin reserves on Dec. 7. According to the international audit company, the crypto exchange possesses control over 575,742.42 Bitcoin of its customers, worth $9.7 billion at the time of the report. Per the methodology, \u201cBinance was 101% collateralized\u201d, said the company. <\/p>\n<p>The scope of the report included customers\u2019 spot, options, margin, futures, funding, loan and earn accounts for Bitcoin and wr<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ed Bitcoin (WBTC). Aside from the Bitcoin network, BTC wrapped on Ethereum, BNB Chain and BNB Smart Chain were also included in the inquiry, Cointelegraph reported. <\/p>\n<p><template data-name=\"subscription_form\" data-type=\"crypto_biz\"><\/template><\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/binance-s-proof-of-reserves-raises-red-flags-report\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Binance&#8217;s proof-of-reserves raises red flags: Report &#8220; Binance&#8217;s efforts to improve transparency of its reserves also exposed red flags in the crypto exchange&#8217;s finances, according to accounting and financial specialists consulted by The Wall Street Journal.\u00a0 As noted by a former Financial Accounting Standards Board (FASB) member and investment manager, the report released by&#8230;<\/p>\n","protected":false},"author":1,"featured_media":525220,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/cdn-cgi\/image\/format=auto,onerror=redirect,quality=90,width=1200\/https:\/\/s3.cointelegraph.com\/uploads\/2022-12\/b20efcaf-5fed-46b5-bd81-5330d35da730.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[75014,74862,74860,117],"class_list":["post-525219","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-binance","tag-bitcoin","tag-cryptocurrency-exchange","tag-business"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/525219","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=525219"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/525219\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/525220"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=525219"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=525219"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=525219"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}