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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

#51

Post by jacquesm »

hn_throwaway_99 wrote: post #49
jacquesm wrote: post #42

Earlier quoted context omitted.

Chances are they'll be dead if enough people act on that. So they're doing the opposite: reassuring people that everything is fine. If there is one common element that precedes every bank run and run on crypto exchanges and such then it is the 'everything is fine' phase just prior to the implosion.

One clarification: 1. For a bank run on an actual bank, it is known that a bank doesn't keep all your assets on hand - they are loaned out, which is (largely) what allows you to earn interest. So it is known that if everyone tries to withdraw at the same time that there won't be enough money. 2. For an exchange/brokerage, your money/assets are explicitly NOT supposed to be lent out without your permission. So, in the…

Indeed.

But we already have a whole bunch of examples of (2) where the funds ended up in all kinds of places where they should not have been.

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

#52

Post by ProjectArcturis »

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.

>Mazars is not lower tier.

I don't know much about European accounting firms. But the rest of your comment seems to contradict your initial claim -- i.e. they are not Big Four and they have had a recent scandal.

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

#53

Post by purpleblue »

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.

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

#54

Post by VagueMag »

jacquesm wrote: post #42
fritzo wrote: post #36

Why doesn't Binance flex and encourage a complete withdrawal by say Jan 1? Wouldn't that kind of power move boost its reputation above all competitors?

Chances are they'll be dead if enough people act on that. So they're doing the opposite: reassuring people that everything is fine. If there is one common element that precedes every bank run and run on crypto exchanges and such then it is the 'everything is fine' phase just prior to the implosion.

In the runup to the Lehman Brothers bankruptcy, the CFO Erin Callan would come on CNBC week in and week out to talk about their "fortress balance sheet" and it would always pump the stock a little bit. Was absolutely infuriating to watch, but you can't get too mad at the people doing it, regardless of how bad things get their incentives are 100% aligned with projecting confidence and praying they can hold on long enough for the market to turn back up.

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

#56

Post by MarkPNeyer »

eloff wrote: post #45
xhkkffbf wrote: post #20

Earlier quoted context omitted.

Exactly. And people act like this is a problem with cryptcurrency, but it's really a problem with people in corporations behaving badly.

Cryptocurrency is a useful proxy for people behaving badly. Maybe because it’s unregulated, maybe because it was such an easy target for grifters of all sorts.

Note that FTX didn’t own a single bitcoin. They had lots of knockoffs, but no bitcoin.

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

#57

Post by wpietri »

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…

I think "cult" is the exact dynamic at play here. As much as I love the internet, it has enabled distributed cults on a level rarely seen before. Not only does it support traditional cults with central leaders and official dogmas (which I think includes most MLMs), but they've allowed for a sort of emergent, leaderless cult based on collective creation of the memes that drive it. E.g., QAnon and the cryptocurrency bubble.

And cults can be very persistent, even in the face of spectacular failure! The Great Disappointment predates the US Civil War, but it spawned at least one group that is still going today: https://en.wikipedia.org/wiki/Great_Disappointment

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

#58

Post by jacquesm »

ProjectArcturis wrote: post #52
jacquesm wrote: post #34

Earlier quoted context omitted.

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.

>Mazars is not lower tier. I don't know much about European accounting firms. But the rest of your comment seems to contradict your initial claim -- i.e. they are not Big Four and they have had a recent scandal.

They are in the top 10 in my country and in many others, and they have been cautioned, which is regulator speech for 'improve your act or we'll go after you'. That means that they are on thin ice with respect to any future mistakes (specifically in their crypto division) and that their reputation (for the whole company) is at risk. The effect is that they will go through their customer portfolio and decide which ones they feel are negatively affecting their risk profile and apparently this is one risk that they are not willing to take.

If this was a canary in the coalmine it just started wheezing strangely and it looks a little dizzy.

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

#59

Post by jacquesm »

danuker wrote: post #46
imhoguy wrote: post #11

Proof of reserves != proof of liabilities. Proof today != proof tomorrow.

Indeed. An exchange can borrow loads of assets, have an "attestation" that the assets are in their accounts, then pay them back.

Unless those assets devalue or are not easily liquidated.

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

#60

Post by tipalink »

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…

bc some "schemes" do work, like that friend or relative who got in early on a hot stock. any investment, including those granted the veil of legitimacy, can collapse at any time just as they can continue to skyrocket nonsensically. herd behaviour
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