Michael Burry is known for three things: his financial gain during the 2008 housing bubble, the movie that chronicled that part of his life, and quickly deleting his tweets.
To the surprise of many, Burry stopped deleting his tweets after Elon Musk took over the social network. “Okay, I won’t delete it in the future. Elon has my trust. For a while”🇧🇷 joked🇧🇷 It made life much easier for his followers.
In one of these tweets, published on Friday (16), the investor addressed the topic of the moment: cryptocurrency brokerage audits.
Burry compares cryptocurrencies to credit swaps, pointing out that accounting firms are still learning about the topic as they were in 2005. Going on, he claims that “this is not a good thing”🇧🇷
In the publication, the investor highlights a Bloomberg article pointing out that Mazars, the company that controlled Binance, Crypto.com and KuCoin, has stopped providing services related to cryptocurrencies.
“The same goes for FTX, Binance, etc. Auditing is essentially pointless.”
In addition to Mazars, Armaninocompany that controlled FTX US, is another one that will stop offering services to the cryptocurrency industry. That is, it seems that no one wants to tarnish their reputation if the worst happens to a brokerage firm.
The difficulty of audits
One of the main loopholes in such audits is moving resources to “get the picture”. In other words, a brokerage firm can take a loan, or take money from another subsidiary, to close a gap in its books and pay it back later.
The most famous case concerns Tether and the Bitfinex exchange, both linked to iFinex. At the time, Tether borrowed $850 million (R$4.5 billion) to bail out its sister company Bitfinex.
Meanwhile, criticism of the Binance audit has been linked to the recording of negative balances in the accounts. Basically, an investor could owe Binance 1,000 BTC, and the exchange would deduct that amount from the total amount.
An example of this happened with CoinFlex. After a series of withdrawals, the brokerage went bankrupt, but no such problem would come to light in an audit. After all, the broker said that Roger Ver owed her R$221 million. That is, the public would not notice this even with the use of Merkle trees, a tool that allows you to check whether your own balance has been factored into the sum.
Anyway, the point is that there are loopholes and many are not happy with the current brokerage audits. Thus, Michael Burry, quoted below, is also one of great skepticism on the subject.
“Here is the problem. When I started using a new type of credit swap in 2005, our auditors were learning on the job. This is not a good thing. The same goes for FTX, Binance, etc. Auditing is essentially pointless.”
Here’s the problem. When I started using a new kind of credit default swap in 2005, our auditors learned on the job. That’s not a good thing. The same goes for FTX, Binance, etc. The audit is essentially pointless. pic.twitter.com/mA3MMvaUTu
— Cassandra BC (@michaeljburry) December 16, 2022
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.
