A Wall Street Journal (WSJ) report on December 10 puts a question mark on Binance’s recent moves to reassure investors that it maintains adequate reserves to ensure liquidity. It brings into question the procedures adopted by the South African affiliate of accounting firm Mazara to give the proof of reserves certificate to Binance. Mazaras says in its five-page report that said Binance’s bitcoin holding is 101% collateralized and that it adopted “agree-upon procedures.”
It further adds that “we make no representation regarding the appropriateness” of the procedure. The report was addressed to Binance Capital Management Co. Ltd. based in the British Virgin Islands. The report did not mention total assets or total liabilities but only bitcoin holdings and liabilities.
The report provides two key figures customer liability report balance, which is 597,602 bitcoins, and asset balance report, which is 582,486 bitcoins. It shows the BTC liabilities are 3% greater than BTC assets as of November 22.
The WSJ report says, “In other words, Binance didn’t meet its 1:1 ratio of reserves to customer assets. In U.S. dollar terms, based on bitcoin’s price at the time, the liabilities would have been about $9.68 billion, while the assets would have been $9.43 billion, or about $245 million smaller, according to calculations by The Wall Street Journal.”
In the wake of FTX’s collapse and the cascading effects it had on other crypto firms that had exposure to this third-largest crypto exchange, panic-stricken crypto firms moved to assure investors that they have adequate reserves. Binance led this bandwagon by releasing a proof-of-reserves (PoR) report on November 25. But financial experts cast their doubt on the PoR data provided by Binance saying it doesn’t talk about liabilities. Also, Binance released the details of its bitcoin holdings and liabilities.
