Centralized crypto exchanges were forced to uphold transparency and set up their proof-of-reservers following the failure of FTX. A prominent accounting firm, Mazars had been overseeing the proof-of-reserves reports for major crypto exchanges like Binance, Crypto.com as well as KuCoin. Earlier today, the firm abruptly decided to temporarily cut ties with its crypto clients.
A Binance spokesperson decided to shed light on the same and said,
“Mazars has indicated that they will temporarily pause their work with all of their crypto clients globally, which include Crypto.com, KuCoin, and Binance. Unfortunately, this means that we will not be able to work with Mazars for the moment.”
As mentioned earlier, the firm began working with crypto firms to report their respective proof-of-reserves assessments since last month. Mazars even went on to take down the report that pointed out how Binance’s Bitcoin reserves were overcollateralized.
In addition to this, KuCoin’s Bitcoin, Ethereum [ETH], Tether [USDT], and USD Coin [USDC] reserves found to be were overcollateralized. Crypto.com’s reserves were, however, fully backed 1:1. All of these reports were not available on the Mazars website.
Elaborating on the way forward, the Binance spokesperson said,
“We embrace additional transparency and we are looking into how best to provide those details in the coming months.”
Proof of reserves reports, however, have come under fire since they are not a proper audit as they simply list the firm’s assets, not its liabilities, and instead act as snapshots of the past that attest that the information provided by customers normally holds up.
While Binance was seen looking for other measures to uphold transparency, another accounting firm wanted out.
FTX auditor also bids adieu to its crypto clients
Similar to Mazars, back on Thursday, Armanino, an auditing firm revealed that it would no longer continue its crypto audit practice. It should be noted that Armanino was an auditor for FTX, OKX as well as Gate.
Armanino’s latest move is most likely affected by its involvement with FTX. Just last month, the firm was dragged into a class-action lawsuit for not recognizing irregularities at FTX.US. This suit was filed by an FTX customer who claims to have lost $20,000.
With advanced scrutiny by regulators over the crypto industry, accounting firms are likely to steer away.