Mazars Suspends PoR Audits for Crypto Exchanges
- Mazars have decided to pause “its activity relating to the provision of Proof of Reserves Reports for entities in the cryptocurrency sector.”
- The audit firm stated that it has “concerns regarding the way these reports are understood by the public.”
- Mazars’ audits are “performed in accordance with Reporting Standards relevant to an Agreed Upon Procedures report.”
- Binance, KuCoin, and Crypto.com are some of the exchanges which had partnered with the international audit firm.
Following the collapse of the former multi-billion dollar crypto exchange, FTX, all the major crypto exchanges came out in the spirit of transparency to release their own proof of reserves report with the world’s largest, crypto exchange, Binance, leading the initiative. International audit firm Mazars was employed by Binance, and this trend was passed on to other exchanges as well.
However, after releasing Binance’s audit report, which claimed that the crypto exchange, which was co-founded by Changpeng Zhao, also known as “CZ” in the crypto community, had overcollaterized Bitcoin (BTC) reserves, Mazars received backlash as reports suggested that there was something wrong with the Binance PoR. This resulted in a FUD regarding the exchange’s operational status.
As a result of this event, Mazars has decided to suspend all work with its crypto clients, which include Binance, Crypto.com, and KuCoin, some of the biggest exchanges in the crypto space with the largest number of users. While the audit firm has released PoR reports for all these crypto exchanges, it has decided that it won’t work with them anymore, as per a report from CNBC.
In a partnership with Mazars, these crypto exchanges wanted to show that they have enough money to process withdrawals for all the people that use their platform. However, the audit firm is known to bail out and fire organizations that it feels do not have crystal clear finances. In February, the firm fired the Trump Organization due to a lack of reliability in the organization’s financial statements.
Mazars told CNBC that it has “paused its activity relating to the provision of proof of reserve reports for entities in the cryptocurrency sector due to concerns regarding the way these reports are understood by the public.” The audit firm stated that its audit reports are “performed in accordance with Reporting Standards relevant to an Agreed Upon Procedures report.”
“They do not constitute either an assurance or an audit opinion on subject matter. Instead they report limited findings based on the agreed procedures performed on the subject matter at a historical point in time,” said Mazars.
In a statement, Binance confirmed the same, adding that “Mazars has indicated that they will temporarily pause their work with all of their crypto clients globally, which include Crypto.com, KuCoin, and Binance.” The leading exchange further stated that “unfortunately, this means that we will not be able to work with Mazars for the moment.”
In the report from Mazars regarding Binance PoR, the audit firm confirmed that the Bitcoin (BTC) reserves of the exchange are collateralized by 101%, which basically means that the exchange has more BTC in its holdings than its liabilities/customer assets, which currently amount to a value of 575,742 BTC.
Interestingly, the CEO of Kraken, Jesse Powell stated that Merkle Tree proofs are not enough to prove an exchange’s solvency, as they do not consist of information related to the liabilities of an exchange.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
