After accounting firm Mazars claimed that Binance owns 101% of its clients’ Bitcoin reserves, Kraken’s Jesse Powell expressed doubts about the results and asked journalists to investigate such an audit.
The Kraken founder’s new critique of Binance complements the old one. At the end of November, Powell had already claimed that his biggest competitor’s evidence of reservations was merely “ignorance or false information.”
The following week, Kraken laid off about 1,100 employees. Changpeng Zhao, CEO of Binance, took the opportunity to reply, stating that investors should be “careful about the platform they are dismissing”.
That is, the two giants are battling on social networks as distrust drags the market down after FTX’s bankruptcy.
Kraken founder criticizes Binance Audit
Jesse Powell recalled his words before Mazars was signed by Binance, noting that a proof of reserves must exclude liabilities (negative balances) and that the exchange must sign disputed addresses.
Subsequently, the founder of Kraken asks journalists to investigate the Binance audit, stating that it may contain loopholes.
“Okay, I’ll give you a hint. These are just the easy stuff saying that this is CLEARLY not traditional proof of booking and should be immediately investigated by real journalists.
Powell highlights some excerpts from the Mazars audit in his tweet. Note, for example, that negative balances have been taken into account. He then points out that Binance only has 97% of its reserves in BTC – ignoring loans secured in other cryptocurrencies.
Another point was the lack of signatures from verified addresses. That is, the founder of Kraken wonders if such wallets really belong to his rival.
“Why use collateral value?
Why are negative balances included?
No wallet subscription?
Who issues BTCB and BBTC?”
ok, i’ll give you a hint. These are just the easy stuff saying that this is CLEARLY not traditional evidence of reservations and real journalists should have looked for it immediately.
Why use collateral value? Why include negative balances? Don’t sign a wallet? Who issues BTCB & BBTC? pic.twitter.com/F9u4XJ5WSi
— Jesse Powell (@jespow) December 8, 2022
Could Binance be falsifying its audit?
Given the huge feud between Powell and Zhao in recent weeks, it’s hard to know if the Kraken founder’s concerns are genuine or just a tantrum with his rival.
Either way, your tweets should inspire the most skeptical. First, we can expect on-chain investigations that look for suspicious movements before and after the audit, especially those after the FTX bankruptcy.
Finally, the problem is that there seem to be loopholes, some off-chain, such as negative balances. However, it is difficult, if not impossible, to know if Binance has taken advantage of it.
In other words, Powell is challenging the boundaries of a third-party audit in search of answers to some key questions. In other words, it’s still better to keep your bitcoins in your own custody whenever possible.
Source: Live Coins
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
