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Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work

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Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work

#101

Post by jacquesm »

purpleblue wrote: post #53
janakalin wrote: post #5

FTX was also audited by a top firm, Armanino!Changed nothing... In the article says: Following the collapse of FTX, Paul MacIntosh, EY’s US financial services crypto co-leader, said on LinkedIn that proof of reserves reports do not assess companies’ internal controls, “which ultimately was the downfall of FTX”.

Armanino is not a top firm. If you're not using Big 4, there's a reason.

That's mostly fair, but the Big 4 are very good at billing partner prices for junior work and some of the mid-tier companies do excellent work for a much better rate.

Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work

#103

Post by wbl »

akudha wrote: post #62
epolanski wrote: post #26

Earlier quoted context omitted.

You would be surprised at human greed. Was it last week when there was an interview with several "investors", and pretty much all of them admitted they knew they were speculating in a highly volatile and unregulated market before they lost all their savings in FTX' crash? They knew the risks, they tried anyway, some really needed that money.

It is greed for sure. But it is also the lack of legit opportunities to invest, unless one is an accredited investor. I found a handful of places I wanted to invest, but I can't, because I am not an accredited investor. I am left with stock market and crypto. It is super funny (sad?) that I can go to Vegas and blow up my life savings in a matter of hours. There are no rules to save me from that. But there are rules c…

There are literally thousands of public US companies to pick from across many industries and sizes.

Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work

#104

Post by VLM »

jacquesm wrote: post #8
nayuki wrote: post #6

> “We are financially OK,” said Zhao Where have we heard this before? Oh yeah: FTX is fine. Assets are fine.

Interesting how the players change but the script is exactly the same and yet, people keep falling for it. I really don't get it. I once knew some people that were up to their necks in an MLM/pyramid scheme, it was like a cult, no matter how many examples you gave them of people ending up losing their shirts they would buy more of the crap and stuff it in every nook and cranny of their house being sure that they were…

Its very simple, bad money always pushes out good money.

I truly honestly believe Coinbase is reputable. No sarc I personally believe in that company and I'm trying to be complimentary, although I have no personal affiliation other than having been an active historical customer. Anyway, they are/were/IIRC offering a loan product as an investment paying something like 5% APR (back when inflation was running about 10% LOL)

The problem is FTX was/IIRC offering a similar loan product as an investment paying something like 8%. Pyramid schemes always advertise larger numbers than the market can honestly support, its not like that have to actually earn the money LOL.

So you end up with rando speculator-investors tossing money at FTX, who wants to flush 3% down the drain by signing on with the "wrong" website?

Thus either Coinbase has to go out of business, get acquired by FTX, or hope FTX crashes and burns before the first two happen. Apparently the last option happened LOL, bye FTX.

The FTX business model was to get real big real fast and pay politicians for regulation to put their competitors out of business. Can't lose if you're the biggest and its illegal to compete with you. Ran out of money too quickly, oh well.

This is how markets work. The winners are not the "best" in some vague sense of goodness, they're the ones who took on the most risk possible without getting caught, and the more perfect the market and easier it is to flood capital in a different direction, the worse the effect gets.

The biggest dog on the block is always the first to keel over because they ran the most risks to get to be that biggest dog on the block.

This isn't a unique to finance situation, this happens in everything from automotive to mining to fro-yo fad restaurants.

> MLM/pyramid scheme, it was like a cult, no matter how many examples you gave them of people ending up losing their shirts they would buy more of the crap

Let me introduce you to my little friend, the biggest real estate hyperinflation in history. It's double plus ungood badthink to even hint in polite company that once the boomers are done, prices are going to implode to a level the latter generations can actually afford, which isn't much...

Another financial thing to look at, melt ups. Some markets that implode don't melt "down" then melt "up" as the ever shrinking number of people supporting the price disappear, upward pressure on prices actually increase as only the true believers are left.

Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work

#105

Post by jacquesm »

happyopossum wrote: post #90
jacquesm wrote: post #84

Earlier quoted context omitted.

Dipping into customers funds for operating expenses or other uses (loans to associated parties, investment, leveraging) is a big no for an exchange, obviously, whether or not it is fraud is ultimately for a judge to determine but it sure looks like that to me. The lure of those balances is invariably too great to resist.

> The lure of those balances is invariably too great to resist. I think the folks at JP, etrade, and all of the other regulated exchanges would object to that characterization.

Regulated exchanges are obviously a different branch entirely, but the rest of them have serious problems keeping their hands off the customer funds. And as was pointed out to me upthread even the regulated exchanges may not have enough of a wall between the crypto they hold for customers and their operating funds to guarantee that those customer funds are going to be there if the company fails.

Time and again we find that exchanges have been dipping in and using money that wasn't theirs in ways that would never fly in a regulated environment.

Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work

#106

Post by patio11 »

ethbr0 wrote: post #100
Animats wrote: post #72

"Binance has said it holds more than $60bn in assets, enough to honour withdrawals. The company’s disclosures do not include its liabilities, which makes it difficult to ascertain its financial health." Possibilities: 1) They're insolvent. Liabilities exceed assets. (Like FTX.) 2) Their accounting is so screwed up they can't produce a balance sheet. (Like FTX). 3) They have a large number of interconnected corporate…

> 3) They have a large number of interconnected corporate entities and nobody has the big picture. (Like FTX). This isn't true, is it? FTX had The issue was more with (1) and (2).

FTX had more than 100 entities. You can find the org chart in the bankruptcy filing or here:

https://qz.com/ftx-bankruptcy-filing-reveals-a-remarkably-co...

Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work

#107

Post by rchaud »

jacquesm wrote: post #34
ProjectArcturis wrote: post #32

"To prepare a proof of reserves report, an auditor uses procedures agreed with the company but does not vouch for whether those procedures are appropriate. The auditor also does not give any assurance or opinion over the numbers in the report, as it would in a full financial audit." What does it say that a lower-tier accounting firm wouldn't even complete this garbage process?

Mazars is not lower tier. They're not in the big four but they are quite large and well respected, at least they were until they - and BDO, another large accounting firm - were flagged as insufficient in terms of oversight by the UK regulators. See: https://www.bloomberg.com/news/articles/2022-07-20/mazars-bd... So they're on thin ice and they will not risk going down with this particular ship.

They are by definition lower-tier, as they don't have the resources to run an audit for a firm that purportedly maintains billions in reserves. A contract of that size wouldn't end up at a regional arm in South Africa anyway.

Big 4 auditors aren't exactly cheap, but there is a reason why they audit all the major firms. Mazar's biggest customer appears to be the Trump Organization.

Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work

#108

Post by jacquesm »

ta988 wrote: post #94
jacquesm wrote: post #89

Earlier quoted context omitted.

For now at least with Coinbase it is the investors funds at risk, not the customers funds. And that example shows how hard it is to run such a business profitably.

So what does that tell about the exchanges that are managed in an unauditable way...

Essentially that they are most likely dipping in to support either their operations or other projects from the customer funds. That's not proof, but I would not at all be surprised if there isn't a single one of them that is clean.

Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work

#109

Post by [deleted] »

ethbr0 wrote: post #100
Animats wrote: post #72

"Binance has said it holds more than $60bn in assets, enough to honour withdrawals. The company’s disclosures do not include its liabilities, which makes it difficult to ascertain its financial health." Possibilities: 1) They're insolvent. Liabilities exceed assets. (Like FTX.) 2) Their accounting is so screwed up they can't produce a balance sheet. (Like FTX). 3) They have a large number of interconnected corporate…

> 3) They have a large number of interconnected corporate entities and nobody has the big picture. (Like FTX). This isn't true, is it? FTX had The issue was more with (1) and (2).

[deleted]

Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work

#110

Post by epolanski »

throw_pm23 wrote: post #76
akudha wrote: post #62

Earlier quoted context omitted.

It is greed for sure. But it is also the lack of legit opportunities to invest, unless one is an accredited investor. I found a handful of places I wanted to invest, but I can't, because I am not an accredited investor. I am left with stock market and crypto. It is super funny (sad?) that I can go to Vegas and blow up my life savings in a matter of hours. There are no rules to save me from that. But there are rules c…

This is a good insight -- not just for non-accredited, but for everyone. The persistent low-interest era meant lack of investment opportunities for a decade which explains much of the crypto boom and many other phenomena.

> The persistent low-interest era meant lack of investment opportunities

Is that true?

Just putting your money on an index fund like S&P would've yielded you an average 14.5% per year in the last decade or an almost 400 % return in a decade.

Stock market more than doubled in the last 5 years and it highly outperformed crypto markets.

There has been no shortage of investment opportunities, but you people sound simply...looking for highly volatile quick gains.

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