Accounting firm Mazars Group has suspended all work with its crypto clients. The choice to chop ties with Binance, KuCoin and Crypto.com comes just after the worldwide accounting firm released “proof of reserve” reports for several digital asset exchanges.
The move comes as major cryptocurrency exchanges look to prove their solvency, and show they come up with the money for to cover customer withdrawals. The CEOs of Binance and Crypto.com have looked to tell apart their very own business practices from what happened at FTX, which has been charged with illegally using customer deposits for years before filing for bankruptcy. Its founder, Sam Bankman-Fried, is facing multiple counts of fraud and money laundering.
Mazars fired the Trump Organization as a client in February, citing a scarcity of reliability within the organization’s financial statements.
Mazars Group said in a press release to CNBC that it had “paused its activity referring to the availability of Proof of Reserves Reports for entities within the cryptocurrency sector because of concerns regarding the way in which these reports are understood by the general public.”
The statement added Mazars’ proof of reserves reports are “performed in accordance with Reporting Standards relevant to an Agreed Upon Procedures report.”
“They don’t constitute either an assurance or an audit opinion on material. As a substitute they report limited findings based on the agreed procedures performed on the material at a historical time limit,” the statement continued.
A spokesperson from Binance, the world’s largest crypto exchange, told CNBC in a press release that, “Mazars has indicated that they’ll temporarily pause their work with all of their crypto clients globally, which include Crypto.com, KuCoin, and Binance.”
“Unfortunately, which means we won’t find a way to work with Mazars for the moment,” Binance said.
Each bitcoin and Binance’s BNB token took a dip on the news, with bitcoin initially dropping nearly 3% and Binance’s native token falling near 5.5%.
Mazars’ South African branch published a five-page proof of reserves for Binance on Dec. 7, but the report is not any longer available on the firm’s website as of Friday morning. Unlike standard audits, the proof of reserves for Binance only accounted for bitcoin. The report didn’t show liabilities for Binance’s lending arm. Binance CEO Changpeng Zhao has often said that the corporate itself has no debt.
On Dec. 9, Crypto.com published a proof of reserves audited by Mazars, attesting that customer assets were held on a 1-to-1 basis, meaning that every one deposits were 100% backed by Crypto.com‘s reserves. A spokesperson for the exchange reiterated that the firm had “successfully” accomplished its recent proof of reserves in collaboration with Mazars and that the accounting company had “provided independent verification of our secure on-chain digital assets matching our customer balances 1:1.”
Crypto.com added that customers can confirm their balance on its website. A spokesperson said the corporate will “proceed to interact with reputable audit firms in 2023 and beyond” as they “seek to extend transparency across the whole industry.”
KuCoin said its proof of reserve report was already delivered by Mazars. “In the longer term, we’re open to work with any leading and reputable audit to supply the third-party verification report,” a KuCoin spokesperson said.
Meanwhile, Ernst & Young, PricewaterhouseCoopers, Deloitte and KPMG — collectively dubbed accounting’s Big 4 — have not made moves to drop their crypto clients. Coinbase, for instance, is a client of Deloitte. Tether uses Moore Cayman.
The Big 4 didn’t immediately reply to CNBC’s request for comment.
In an interview Thursday on CNBC’s “Squawk Box,” Zhao said Binance is working with auditing firms, though he didn’t name which of them. He added that “interestingly, many audit firms are form of scared to work with crypto businesses.”
“There are just a few audit firms that audited FTX and so they got burned because they provide the stamp of approval, and I do not understand how they did the audits. But audits don’t reveal every problem,” continued Zhao, noting that a lot of those firms “don’t understand how” to audit crypto changes.
“They do not know find out how to audit user assets, different blockchains,” he said.
