(photo courtesy of freeimages.com under fair use)
Things haven't been looking great for Binance lately. The interventions on Twitter of its CEO Changpeng Zhao (CZ) fuding publicly competitors like Coinbase and deleting his posts after have been a PR disaster. Then stating with an arrogance that they "don't owe any loans to anyone. Ask around" when a user asked him if they will do an independent proof of liabilities, was another communications red flag.
The "ask around" line is eerily familiar to Do Kwon's "steady lads, deploying more capital" when Luna was crashing. It doesn't provide reassurance to users or the market.
To quell the fud that it might be insolvent Binance agreed to do a Proof of Reserves audit. For that, the international auditing firm Mazars was hired. Instead of a full audit, Mazars did an Agreed Upon Procedure (AUP) engagement in which sampling and materiality is agreed upon between Binance and Mazars. Interestingly, Kucoin, and Cryptodotcom also performed AUPs instead of audits for their PoR. Again, Mazars and not any of the Big 4 accounting firms was the company tasked with doing the AUPs.
(Screenshot from Kraken's CEO Jesse Powell on Twitter)
Jesse Powell, CEO of Kraken and a crypto OG called out Binance and the other exchanges trying to pass an AUP as a Proof of Reserves audit.
To add to all what has happened, the US Department of Justice (DOJ) is looking to charge Binance for money laundering and criminal sanctions evasion violations. Binance has been under the investigation of DOJ since 2018. During 2022, Reuters reported that Binance processed more than $10 billion in payments for criminals and entities attempting to evade US sanctions.
I don't know if Binance will follow the FTX path. That remains to be seen as more information comes to light. As for the DOJ case, Binance has been able to evade authorities so far by constantly changing jurisdictions and moving from one place to another.
One thing is certain, in this market I don't see much upside for a normal retail user to keep their assets in a centralized exchange.
But, I see a lot of downside; ergo losing those assets.
Instead, it's safer to move your crypto into your own custody. That way you will have peace of mind till the dust settles. This will only cost you a couple of dollars in fees.
At the end of the day "not your keys, not your crypto" is probably one of the best advice you can get in the crypto space.
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Originally posted on my Leofinance blog. Updated version only on Publish0x.
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