All work with cryptocurrency customers has been suspended by accounting company Mazars Group. Immediately following the worldwide accounting firm’s release of “proof of reserve” reports for various digital asset exchanges, the decision to discontinue links with Binance, KuCoin, and Crypto.com was made.
The action is being taken as big cryptocurrency exchanges attempt to demonstrate their solvency and demonstrate that they have sufficient funds to cover customer withdrawals. The CEOs of Binance and Crypto.com have sought to set apart their own business procedures from what transpired at FTX, which has been accused of spending customer money unlawfully for years prior to declaring bankruptcy. Sam Bankman-Fried, the company’s founder, is charged with numerous counts of fraud and money laundering.
In February, Mazars dropped the Trump Organization as a customer due to concerns about the accuracy of the company’s financial reports.
In response to worries about how the public might interpret these reports, Mazars Group said in a statement to CNBC that it had “paused its work relating to the issuance of Proof of Reserves Reports for firms in the cryptocurrency sector.”
According to the statement, Mazars’ reports on evidence of reserves “are completed in compliance with Reporting Standards relevant to a report on Agreed Upon Procedures.”
“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,” the statement continued.
A spokesperson from Binance, the world’s largest crypto exchange, told CNBC in a statement 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.”
“Unfortunately, this means that we will not be able to work with Mazars for the moment,” Binance said.
The revelation caused a decline in both bitcoin and Binance’s BNB token, with bitcoin first plunging close to 3% and Binance’s native token dropping close to 5.5%.
On December 7, the South African division of Mazars released a five-page proof of reserves for Binance; however, as of Friday morning, the report was no longer accessible on the company’s website. The proof of reserves for Binance, in contrast to conventional audits, exclusively included bitcoin. Liabilities for Binance’s loan division were not disclosed in the report. Changpeng Zhao, the CEO of Binance, has frequently said that the business is debt-free.
On December 9, Crypto.com released a proof of reserves audited by Mazars attesting that customer assets were held 1-to-1, or that all deposits were entirely guaranteed by Crypto.com’s reserves. A representative for the exchange reaffirmed that Mazars had “given independent verification of our secure on-chain digital assets matching our customer balances 1:1” and that the firm had “successfully” completed its most recent proof of reserves in partnership with the accounting firm.
Crypto.com added that customers can verify their balance on its website. A spokesperson said the company will “continue to engage with reputable audit firms in 2023 and beyond” as they “seek to increase transparency across the entire industry.”
KuCoin said its proof of reserve report was already delivered by Mazars. “In the future, we are open to work with any leading and reputable audit to provide the third-party verification report,” a KuCoin spokesperson said.
The Big Four of accounting—Ernst & Young, PricewaterhouseCoopers, Deloitte, and KPMG—haven’t taken any steps to stop working with cryptocurrency customers. One of Deloitte’s clients is Coinbase. Moore Cayman is used by Tether.
The request for comment from CNBC was not immediately answered by The Big Four.
In an interview Thursday on CNBC’s “Squawk Box,” Zhao said Binance is working with auditing firms, though he didn’t name which ones. He added that “interestingly, many audit firms are kind of scared to work with crypto businesses.”
“There are a few audit firms that audited FTX and they got burned because they give the stamp of approval, and I don’t know how they did the audits. But audits don’t reveal every problem,” continued Zhao, noting that many of those firms “don’t know how” to audit crypto changes.
“They don’t know how to audit user assets, different blockchains,” he said.
