Mazars' audit report raised concerns about corporate structure, Bitcoin liabilities, and internal control quality.
As noted by a former Financial Accounting Standards Board member and investment manager, the report released by the audit firm Mazars does not bring investors confidence about the exchange's finance as it lacks information related to the quality of internal controls and how its systems liquidate assets to cover margin loans.
Differences between the total Bitcoin liabilities were also highlighted. The exchange's proof-of-reservesthat Binance was 97% collateralized if excluded assets lended to users through loans or margin accounts, indicating that the 1:1 ratio of reserves to customer assets was not achieved. Mazars' letter states about the difference:
John Reed Stark, Senior Lecturing Fellow at Duke University School of Law and former chief at Office of Internet Enforcement for the Securities Exchange Commission ,"Binance’s “proof of reserve” report doesn’t address effectiveness of internal financial controls, doesn’t express an opinion or assurance conclusion and doesn’t vouch for the numbers. I worked at SEC Enforcement for 18+ yrs. This is how I define red flag.
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