Paris-headquartered Mazars has been at the forefront of the crypto industry’s rush to conduct ‘proof-of-reserves’ reports for the likes of Binance and other large exchangesMazars, the accounting firm used by crypto giant Binance and other big players in the industry to vouch for their assets held in reserve, has halted all work for crypto clients, dealing a major blow to an industry seeking to shore up confidence in the wake of FTX’s collapse.
The decision is a setback for an industry that’s been trying to bolster its credibility with investors following the collapse of crypto exchange FTX, which has been accused of misusing customer funds. Auditors have faced similar backlash in recent weeks, given that FTX itself had engaged such services prior to its collapse that seemingly missed any warning signs. Cryptocurrencies fell after the report, with bitcoin down as much as 2.7% in early Europe trading.
“It is unclear how far the solvency contagion could run, and proof of reserves is not the same as proof of solvency,” said Simon Taylor, head of strategy and content at crypto start-up Sardine. “The issue with FTX was that while it had reserves, those reserves were massively over valued relative to their risk in a bank run scenario.”
John J Ray, FTX’s new CEO, told US legislators on Tuesday that the defunct exchange had used accounting software QuickBooks to try to keep track of its finances, a system he said was wholly unsuitable for a company of its size. “Over the last several years, we’ve seen more auditors build out their practice to cater to the unique challenges crypto companies face,” said Maya Zehavi, a cryptocurrency angel investor. “It’s a shame that obfuscated business norms that have become the standard for offshore exchanges will ruin access for legit crypto companies to get professional auditing.”Others have bemoaned a historic lack of expertise among top-tier auditors about how to analyse blockchain transactions and cryptoassets.
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