3 ms·

Well FTX's competitors are not necessarily not fraudulent, especially their primary competitor Binance.

by SkyMarshal 4y ago

Semaphor 4y ago
What fraud does Binance do besides evading U.S. regulations? note: This is an actual question.
- perlgeek 4y ago
  If the story goes like FTX, we'll only know after it's too late. Not being incorporated anywhere (which is the last thing I heard about the matter) is an extremely bright red flag, so that's some evidence (in the Bayesian sense) that something is off.
- xiphias2 4y ago
  I'm sure they are doing (or at least were doing) fractional reserve banking as well. They have their own token just like FTX, wihch is a bad sign. Maybe right now they are working on fixing it. Kraken is one of the few exchanges that provide proof of reserves, which is basically just a Merkel tree of all user assets which users can use to check that the exchange holds their money. This is not just trivial to implement, there are open source implementations that exchanges could just use and prefer not to.
  - Semaphor 4y ago
    This is pretty cool [0] is the Kraken page, at [1] someone collected both background information, links, and PoR entities, and finally a 2014 post of Kraken’s first PoR audit [2]. [0] https://www.kraken.com/proof-of-reserves https://www.kraken.com/proof-of-reserves [1] https://niccarter.info/proof-of-reserves/ https://niccarter.info/proof-of-reserves/ [2] https://bitcointalk.org/index.php?topic=528432.0 https://bitcointalk.org/index.php?topic=528432.0 Edit: And here is CZ of Binance claiming they’ll do it soon as well: https://nitter.kavin.rocks/cz_binance/status/1590055819416330240 https://nitter.kavin.rocks/cz_binance/status/159005581941633...
    - Yizahi 4y ago
      Have you read Kraken's own page about that? Here is a quote: "The results of our most recent audit were once again verified by top-25 global accounting firm, Armanino LLP. " (1) So from this I read that Kraken has done audit themselves and then some other firm has verified it. This (if true) is called attestation, and not audit. Attestations are an empty claim with no proof in the tokenbro industry. And second issue I see (directly related to the first) - they list some tokens they are auditing. Auditing on chain. But what if the Kraken company has a completely off the chain liabilities? Like a contract where they loan money/btc to some shady person and get some worthless tokens as a collateral in return. You can't see this on chain, only a real independent audit can uncover such things. (1) https://blog.kraken.com/post/15002/kraken-proof-of-reserves-audit-expands-to-include-five-new-assets/ https://blog.kraken.com/post/15002/kraken-proof-of-reserves-...
      - Semaphor 4y ago
        Unless I’m misunderstanding things (as a non-finance person that is very possible), this is not a normal audit, but instead proof, that they actually have the customer tokens they claim to have.
        schlauerfox 4y ago
        If you have 10 bitcoin and lend them to me by giving me the keys and report that wallet as your bitcoin, and in exchange for lending me those, I give you 10 WorthlessCoin as collateral, you now could say you have 20 bitcoin worth of holdings on chain, if you were playing loose with accounting rules. But in the end you might have 0 of anything if I go bust (and lost the bitcoin you lent me first) because of our off chain contract/loan. Dangerous waters.
  - DebtDeflation 4y ago
    A Merkle tree may show what crypto assets are held, but it doesn't stop the exchange from having a balance sheet with a negative $8bn entry described as “hidden, poorly internally labled ‘fiat@’ account”. Until these crypto companies are audited by actual recognized auditors I would just assume that everything they say is suspect.
    - saurik 4y ago
      The auditor that Kraken used claims to be "one of the top 25 largest accounting, consulting and technology firms in the U.S.". Is the idea that they aren't "auditors"?
      - DebtDeflation 4y ago
        Top 25 means literally nothing. Outside of crypto, billion dollar a year companies use the Big 4 (Deloitte, PWC, EY, KPMG) for their audits. There is a second tier of maybe a half dozen audit firms (Grant Thornton being probably one of the best known) below the Big 4, used by smaller companies. By the time you get to #25 you're dealing with mom and pop shops. Also, this wasn't an "audit" in the traditional sense of the word, it was an attestation as to proof of reserves based on the Merkle tree. The press release about the "audit" is full of red flags: "Administered by Armanino LLP, the Proof of Reserves audit is the second of its kind conducted on our exchange since 2014". Two audits in eight years, lol. "Though the audit covers just two of the over 100 assets available for trading on our exchange". They only checked BTC and ETH reserves, nothing else, lol. From the audit report itself: "This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes." "We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, related to the platform account liabilities and asset balances represented by Kraken. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported." "The practitioner’s report is as of a specified point in time and we have no responsibility to update the report or findings therein for subsequent points in time." All this "audit" tells you is that on December 31, 2021 Kraken had an amount of BTC and ETH that matched customer deposits. That's it. Nothing about other coins. Nothing about assets and liabilities overall (e.g., did they take out loans using customer BTC as collateral). Nothing about financial practices. Nothing about what they may or may not have had the day before or the day after.
- anonymoushn 4y ago
  Binance regularly closes deposits or delays deposits by hours in an apparent attempt to allocate arb opportunities to their internal trading desk instead of customers. For example, in May, we sent some LUNA to Binance whole the chain was working perfectly, then waited several hours whole chatting "VIP support" about the delay while they told some implausible lies about multi-hour internal network latency (????).
wweeeebb 4y ago
This is a false equivalence. FTX stole customer deposits and lied about it, to the tune of billions of dollars.
largepeepee 4y ago
Ironically Binance's low trust makes their users especially diligent about on and off boarding their funds. Their model is closer to DeFi than their competitors who are CeFi Besides what makes FTX especially trendy to cover was how he targeted mostly American, supposedly sophisticated SV VC types. He got funded by dozens of billionaires. Funny enough SBF openly described his cynical scam months ago, explaining both how shit coins and greedy VCs operated.
- bondarchuk 4y ago
  >* Their model is closer to DeFi than their competitors who are CeFi* CeFi is CeFi, Binance is CeFi.
flanked-evergl 4y ago
Vote out the politicians who are not prosecuting Binance then also. Not sure how two wrongs make it okay that FTX were ghost writing crypto regulation [1]. [1]: https://coingeek.com/ftx-sam-bankman-fried-pens-crypto-regulation-for-dummies/ https://coingeek.com/ftx-sam-bankman-fried-pens-crypto-regul...

Well FTX's competitors are not necessarily not fraudulent, especially their primary competitor Binance.

Semaphor 4y ago

What fraud does Binance do besides evading U.S. regulations? note: This is an actual question.

perlgeek 4y ago
If the story goes like FTX, we'll only know after it's too late. Not being incorporated anywhere (which is the last thing I heard about the matter) is an extremely bright red flag, so that's some evidence (in the Bayesian sense) that something is off.
xiphias2 4y ago
I'm sure they are doing (or at least were doing) fractional reserve banking as well. They have their own token just like FTX, wihch is a bad sign. Maybe right now they are working on fixing it. Kraken is one of the few exchanges that provide proof of reserves, which is basically just a Merkel tree of all user assets which users can use to check that the exchange holds their money. This is not just trivial to implement, there are open source implementations that exchanges could just use and prefer not to.
- Semaphor 4y ago
  This is pretty cool [0] is the Kraken page, at [1] someone collected both background information, links, and PoR entities, and finally a 2014 post of Kraken’s first PoR audit [2]. [0] https://www.kraken.com/proof-of-reserves https://www.kraken.com/proof-of-reserves [1] https://niccarter.info/proof-of-reserves/ https://niccarter.info/proof-of-reserves/ [2] https://bitcointalk.org/index.php?topic=528432.0 https://bitcointalk.org/index.php?topic=528432.0 Edit: And here is CZ of Binance claiming they’ll do it soon as well: https://nitter.kavin.rocks/cz_binance/status/1590055819416330240 https://nitter.kavin.rocks/cz_binance/status/159005581941633...
  - Yizahi 4y ago
    Have you read Kraken's own page about that? Here is a quote: "The results of our most recent audit were once again verified by top-25 global accounting firm, Armanino LLP. " (1) So from this I read that Kraken has done audit themselves and then some other firm has verified it. This (if true) is called attestation, and not audit. Attestations are an empty claim with no proof in the tokenbro industry. And second issue I see (directly related to the first) - they list some tokens they are auditing. Auditing on chain. But what if the Kraken company has a completely off the chain liabilities? Like a contract where they loan money/btc to some shady person and get some worthless tokens as a collateral in return. You can't see this on chain, only a real independent audit can uncover such things. (1) https://blog.kraken.com/post/15002/kraken-proof-of-reserves-audit-expands-to-include-five-new-assets/ https://blog.kraken.com/post/15002/kraken-proof-of-reserves-...
    - Semaphor 4y ago
      Unless I’m misunderstanding things (as a non-finance person that is very possible), this is not a normal audit, but instead proof, that they actually have the customer tokens they claim to have.
      - schlauerfox 4y ago
        If you have 10 bitcoin and lend them to me by giving me the keys and report that wallet as your bitcoin, and in exchange for lending me those, I give you 10 WorthlessCoin as collateral, you now could say you have 20 bitcoin worth of holdings on chain, if you were playing loose with accounting rules. But in the end you might have 0 of anything if I go bust (and lost the bitcoin you lent me first) because of our off chain contract/loan. Dangerous waters.
- DebtDeflation 4y ago
  A Merkle tree may show what crypto assets are held, but it doesn't stop the exchange from having a balance sheet with a negative $8bn entry described as “hidden, poorly internally labled ‘fiat@’ account”. Until these crypto companies are audited by actual recognized auditors I would just assume that everything they say is suspect.
  - saurik 4y ago
    The auditor that Kraken used claims to be "one of the top 25 largest accounting, consulting and technology firms in the U.S.". Is the idea that they aren't "auditors"?
    - DebtDeflation 4y ago
      Top 25 means literally nothing. Outside of crypto, billion dollar a year companies use the Big 4 (Deloitte, PWC, EY, KPMG) for their audits. There is a second tier of maybe a half dozen audit firms (Grant Thornton being probably one of the best known) below the Big 4, used by smaller companies. By the time you get to #25 you're dealing with mom and pop shops. Also, this wasn't an "audit" in the traditional sense of the word, it was an attestation as to proof of reserves based on the Merkle tree. The press release about the "audit" is full of red flags: "Administered by Armanino LLP, the Proof of Reserves audit is the second of its kind conducted on our exchange since 2014". Two audits in eight years, lol. "Though the audit covers just two of the over 100 assets available for trading on our exchange". They only checked BTC and ETH reserves, nothing else, lol. From the audit report itself: "This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes." "We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, related to the platform account liabilities and asset balances represented by Kraken. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported." "The practitioner’s report is as of a specified point in time and we have no responsibility to update the report or findings therein for subsequent points in time." All this "audit" tells you is that on December 31, 2021 Kraken had an amount of BTC and ETH that matched customer deposits. That's it. Nothing about other coins. Nothing about assets and liabilities overall (e.g., did they take out loans using customer BTC as collateral). Nothing about financial practices. Nothing about what they may or may not have had the day before or the day after.
anonymoushn 4y ago
Binance regularly closes deposits or delays deposits by hours in an apparent attempt to allocate arb opportunities to their internal trading desk instead of customers. For example, in May, we sent some LUNA to Binance whole the chain was working perfectly, then waited several hours whole chatting "VIP support" about the delay while they told some implausible lies about multi-hour internal network latency (????).

wweeeebb 4y ago

This is a false equivalence. FTX stole customer deposits and lied about it, to the tune of billions of dollars.

largepeepee 4y ago

Ironically Binance's low trust makes their users especially diligent about on and off boarding their funds. Their model is closer to DeFi than their competitors who are CeFi Besides what makes FTX especially trendy to cover was how he targeted mostly American, supposedly sophisticated SV VC types. He got funded by dozens of billionaires. Funny enough SBF openly described his cynical scam months ago, explaining both how shit coins and greedy VCs operated.

bondarchuk 4y ago
>* Their model is closer to DeFi than their competitors who are CeFi* CeFi is CeFi, Binance is CeFi.

flanked-evergl 4y ago

Vote out the politicians who are not prosecuting Binance then also. Not sure how two wrongs make it okay that FTX were ghost writing crypto regulation [1]. [1]: https://coingeek.com/ftx-sam-bankman-fried-pens-crypto-regulation-for-dummies/ https://coingeek.com/ftx-sam-bankman-fried-pens-crypto-regul...