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French accounting firm Mazars is pausing all its work with crypto firms

124 points by firstSpeaker 4y ago

anon223345 4y ago
Isn’t Mazars trumps accounting firm
marek22 4y ago
[dead]
dereg 4y ago
Makes sense. There’s no need to use this to read into the solvency of Binance. From Mazars’ perspective, the small amount of fees they receive is not worth the destruction of the rest of their business. Arthur Andersen used to be one of the big accounting firms (the “big four” used to be the “big five” accounting firms) and their association with Enron and Worldcom destroyed their business. There’s no need to force an error by performing these incredibly narrow-scope exercises when the whole world is looking.
- CPLX 4y ago
  > their association with Enron and Worldcom destroyed their business It wasn’t so much the “association” as it was the massive criminal conspiracy they were convicted of.
  - deleted 4y ago
    [deleted]
  - hn_throwaway_99 4y ago
    > the massive criminal conspiracy they were convicted of Not disagreeing with the sentiment, but the conviction was unanimously overturned by the Supreme Court. https://en.m.wikipedia.org/wiki/Arthur_Andersen_LLP_v._United_States https://en.m.wikipedia.org/wiki/Arthur_Andersen_LLP_v._Unite...
    - yborg 4y ago
      As noted in the Wiki article, it was overturned essentially on procedural grounds based on how the jury was instructed. The government could have retried the case with the higher burden of proving willful misconduct by Andersen but by that point the firm was already dead from reputational damage, so I suppose justice was served anyway.
      - quags 4y ago
        “During the fall of Enron, Arthur Andersen, Enron's accounting firm, instructed its employees to destroy documents relating to Enron after Andersen officials learned they would soon be investigated by the Securities and Exchange Commission.” On that alone I’m surprised how it was unanimous on over turn for the Supreme Court. Obviously the documents did not show them in a good light.
        cldellow 4y ago
        The role of appellate courts is generally not to judge the facts of the case, but to judge whether the law has been applied correctly. If you got convicted because the prosecutor and the trial judge didn't know what the law was, that's not right. That's what the Supreme Court decision here was about, not about whether or not Arthur Andersen had committed a crime. In many cases, having your verdict overturned doesn't preclude the prosecutor from trying the case again.
    - tiahura 4y ago
      Another botched case by the liberal hero Andrew Weismann.
- gumboza 4y ago
  From experience working with Mazars, they are perfectly capable of destroying their business without the aid of crypto.
  - jasonzemos 4y ago
    This was the same firm that stood behind the now convicted Trump organization's financial statements.
- fullshark 4y ago
  If these crypto firms (especially Binance) collapse I can’t imagine surreptitiously deleting their audit reports in middle of the night will allow them to escape unscathed.
batmansmk 4y ago
Too little too late. Their work with Binance was non sensical. It’s not a crypto issue, it’s to emit such claims without actually a proper audit is ridiculous. Even with all the proper reserves and small prints, it’s still a true lack of integrity to have even entertain the claim.
- belter 4y ago
  Mazars was the audit firm for the Trump Organization until February...
LatteLazy 4y ago
It's a pity. Proper audits would be a boon for honest crypto exchanges and it would be an opportunity for accountants to show they can actually add value after all the scandals of the last 30 years...
- coffeebeqn 4y ago
  The crypto companies don’t allow real audits. They just do “attestations” where the company can arrange things beforehand to look the way they want and doesn’t allow the accountant to dig behind the presented numbers
  - LatteLazy 4y ago
    As soon as one does, others will have to follow. And right now, accounting companies don't do real audits either (hence Enron and WorldCom and dozens of other examples). This is an opportunity for both of them to up their games.
- quickthrowman 4y ago
  > honest crypto exchanges I am reminded of Diogenes walking the streets of Corinth during the day with a lantern, looking for an honest man. The only one I would expect to be somewhat honest is coinbase, on account of the mandatory SEC filings and actual audits (vs attestations) but Enron, MCI, Tyco, and many other companies had the same oversight, so I’m still skeptical about coinbase being honest.
- ceejayoz 4y ago
  > Proper audits would be a boon for honest crypto exchanges... Correct! Ask yourself if "audits are impossible" is the likely answer to their rarity.
  - jmull 4y ago
    Exactly. There's no such thing as a proper audit for crypto. Perhaps it could be invented, but no one has. I doubt the will to do it exists, since that would seem to be against the interests of all the big crypto players.
tootie 4y ago
Mazars is the same firm that disclaimed all their audits of the Trump Org the minute they were investigated. Their reputation is in tatters in an industry built on reputation.
- mannykannot 4y ago
  Its reputation for focusing utterly on just what it is being paid to do seems to be growing stronger every day.
- _fizz_buzz_ 4y ago
  Doubt it. In 2008 lots of rating agencies made terrible judgment calls about the subprime crisis. We were upset and there was lots of talk about how this was so terrible for their reputation. A couple of weeks later everyone went back to business as usual. https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the_subprime_crisis https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the...
neilv 4y ago
> Mazars has since deleted all crypto reports from its website. Are those reports something an accounting firm is supposed to either stand behind or formally retract? Does removing the reports constitute a retraction, or is it normal when a business relationship ends, or is it improper?
- Bluecobra 4y ago
  From what I gather, they could be on the hook during bankruptcy proceedings if they said everything was a-ok when it actually wasn’t. Exiting the space should shield them from that.
  - noja 4y ago
    Why would it shield them from something they already did?
exit 4y ago
if all relevant business transactions and arrangements are properly logged, what more is there to do than algorithmically digest these records and produce a result? i'm trying to understand what the necessary human element is in the operation of accounting firms. i imagine there are strategic aspects, i.e. how to categorize and structure future transactions?
- alexarnesen 4y ago
  the first pass is usually an algorithmic digest. the human element is required to recognize a subset of all transactions as requiring further analysis. some transactions require special consideration in either tax or reporting contexts. if every accounting system were a relational database, and every entry had multiple foreign keys to every appropriate classification, we could virtually eliminate CPA's. as it stands each accounting system is bespoke and idiosyncratic. some of them record transactions on sheets of paper. source: dating a CPA
  - exit 4y ago
    > if every accounting system were a relational database, and every entry had multiple foreign keys to every appropriate classification, we could virtually eliminate CPA's. i'd like to hear it confirmed from additional sources but this is what i suspected. i also imagine those with the necessary skills to formalise these practices are (understandably) not eager to automate themselves out of the value capture loop.
- ceejayoz 4y ago
  There’s off-chain stuff happening. They use their holdings as collateral on riskier investments, like the commercial paper holdings Tether had. Humans have to untangle these, and sometimes that untangling reveals disaster.
  - exit 4y ago
    > There’s off-chain stuff happening. sure, i'm asking about businesses in general and that's why i specified "properly logged"
21eleven 4y ago
It's ironic that crypto exchanges need to use accounting firms for audits when the whole point of a blockchain is to account for things.
- soulofmischief 4y ago
  It's because internal exchange transactions are not on-chain. When you deposit crypto to a typical exchange, it sits in a hot wallet or gets moved to cold storage. Any further transactions you make on the platform, such as exchanging currency, just shift around balances on a regular database. Only when you withdraw does it show on the chain. This is not a crypto problem.
  - di456 4y ago
    There's no technical reason why internal accounting systems didn't post to a Blockchain based ledger. However most companies don't build their own accounting systems, it's too much of a liability and good luck getting an auditor to sign off on financials from something homegrown. And I not even sure if a commercial off the shelf blockchain-based accounting system exists, does one?
    - soulofmischief 4y ago
      > There's no technical reason why internal accounting systems didn't post to a Blockchain based ledger. I agree. Using the main chain obviously costs network fees, which for the high amount of transactions involved in running an exchange is untenable. However, there's no reason an exchange couldn't use its own public blockchain to allow independent auditing. > And I not even sure if a commercial off the shelf blockchain-based accounting system exists, does one? Not to my knowledge, and I know some crypto projects would love to use a product like this. Could be worth doing some market research.
      - di456 4y ago
        There is one market where I see a need for this, and it's OSS where transparency is important for building trust. However, what's holding any company back from releasing a read-only connection to their live financial systems?
bogomipz 4y ago
It's worth noting that that this is the same accounting firm which earlier this year retracted 9 years of "statements of financial condition" that they had prepared for The Trump Organization.[1]. The Trump Organization was found guilty of financial fraud earlier this month.[2]. These same Mazar statements are also at the center of another ongoing fraud case being brought by an Attorney General.[3] [1] https://www.nytimes.com/2022/02/14/nyregion/mazars-trump-organization-financial-statements.html https://www.nytimes.com/2022/02/14/nyregion/mazars-trump-org... [2] https://www.nytimes.com/live/2022/12/06/nyregion/trump-organization-trial-verdict https://www.nytimes.com/live/2022/12/06/nyregion/trump-organ... [3] https://www.nytimes.com/2022/09/21/nyregion/trump-fraud-lawsuit-ny.html https://www.nytimes.com/2022/09/21/nyregion/trump-fraud-laws...
dang 4y ago
Related ongoing thread: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work - https://news.ycombinator.com/item?id=34028921 https://news.ycombinator.com/item?id=34028921 - Dec 2022 (218 comments)

124 points by firstSpeaker 4y ago

anon223345 4y ago

Isn’t Mazars trumps accounting firm

marek22 4y ago

[dead]

dereg 4y ago

Makes sense. There’s no need to use this to read into the solvency of Binance. From Mazars’ perspective, the small amount of fees they receive is not worth the destruction of the rest of their business. Arthur Andersen used to be one of the big accounting firms (the “big four” used to be the “big five” accounting firms) and their association with Enron and Worldcom destroyed their business. There’s no need to force an error by performing these incredibly narrow-scope exercises when the whole world is looking.

CPLX 4y ago
> their association with Enron and Worldcom destroyed their business It wasn’t so much the “association” as it was the massive criminal conspiracy they were convicted of.
- deleted 4y ago
  [deleted]
- hn_throwaway_99 4y ago
  > the massive criminal conspiracy they were convicted of Not disagreeing with the sentiment, but the conviction was unanimously overturned by the Supreme Court. https://en.m.wikipedia.org/wiki/Arthur_Andersen_LLP_v._United_States https://en.m.wikipedia.org/wiki/Arthur_Andersen_LLP_v._Unite...
  - yborg 4y ago
    As noted in the Wiki article, it was overturned essentially on procedural grounds based on how the jury was instructed. The government could have retried the case with the higher burden of proving willful misconduct by Andersen but by that point the firm was already dead from reputational damage, so I suppose justice was served anyway.
    - quags 4y ago
      “During the fall of Enron, Arthur Andersen, Enron's accounting firm, instructed its employees to destroy documents relating to Enron after Andersen officials learned they would soon be investigated by the Securities and Exchange Commission.” On that alone I’m surprised how it was unanimous on over turn for the Supreme Court. Obviously the documents did not show them in a good light.
      - cldellow 4y ago
        The role of appellate courts is generally not to judge the facts of the case, but to judge whether the law has been applied correctly. If you got convicted because the prosecutor and the trial judge didn't know what the law was, that's not right. That's what the Supreme Court decision here was about, not about whether or not Arthur Andersen had committed a crime. In many cases, having your verdict overturned doesn't preclude the prosecutor from trying the case again.
  - tiahura 4y ago
    Another botched case by the liberal hero Andrew Weismann.
gumboza 4y ago
From experience working with Mazars, they are perfectly capable of destroying their business without the aid of crypto.
- jasonzemos 4y ago
  This was the same firm that stood behind the now convicted Trump organization's financial statements.
fullshark 4y ago
If these crypto firms (especially Binance) collapse I can’t imagine surreptitiously deleting their audit reports in middle of the night will allow them to escape unscathed.

batmansmk 4y ago

Too little too late. Their work with Binance was non sensical. It’s not a crypto issue, it’s to emit such claims without actually a proper audit is ridiculous. Even with all the proper reserves and small prints, it’s still a true lack of integrity to have even entertain the claim.

belter 4y ago
Mazars was the audit firm for the Trump Organization until February...

LatteLazy 4y ago

It's a pity. Proper audits would be a boon for honest crypto exchanges and it would be an opportunity for accountants to show they can actually add value after all the scandals of the last 30 years...

coffeebeqn 4y ago
The crypto companies don’t allow real audits. They just do “attestations” where the company can arrange things beforehand to look the way they want and doesn’t allow the accountant to dig behind the presented numbers
- LatteLazy 4y ago
  As soon as one does, others will have to follow. And right now, accounting companies don't do real audits either (hence Enron and WorldCom and dozens of other examples). This is an opportunity for both of them to up their games.
quickthrowman 4y ago
> honest crypto exchanges I am reminded of Diogenes walking the streets of Corinth during the day with a lantern, looking for an honest man. The only one I would expect to be somewhat honest is coinbase, on account of the mandatory SEC filings and actual audits (vs attestations) but Enron, MCI, Tyco, and many other companies had the same oversight, so I’m still skeptical about coinbase being honest.
ceejayoz 4y ago
> Proper audits would be a boon for honest crypto exchanges... Correct! Ask yourself if "audits are impossible" is the likely answer to their rarity.
- jmull 4y ago
  Exactly. There's no such thing as a proper audit for crypto. Perhaps it could be invented, but no one has. I doubt the will to do it exists, since that would seem to be against the interests of all the big crypto players.

tootie 4y ago

Mazars is the same firm that disclaimed all their audits of the Trump Org the minute they were investigated. Their reputation is in tatters in an industry built on reputation.

mannykannot 4y ago
Its reputation for focusing utterly on just what it is being paid to do seems to be growing stronger every day.
_fizz_buzz_ 4y ago
Doubt it. In 2008 lots of rating agencies made terrible judgment calls about the subprime crisis. We were upset and there was lots of talk about how this was so terrible for their reputation. A couple of weeks later everyone went back to business as usual. https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the_subprime_crisis https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the...

neilv 4y ago

> Mazars has since deleted all crypto reports from its website. Are those reports something an accounting firm is supposed to either stand behind or formally retract? Does removing the reports constitute a retraction, or is it normal when a business relationship ends, or is it improper?

Bluecobra 4y ago
From what I gather, they could be on the hook during bankruptcy proceedings if they said everything was a-ok when it actually wasn’t. Exiting the space should shield them from that.
- noja 4y ago
  Why would it shield them from something they already did?

exit 4y ago

if all relevant business transactions and arrangements are properly logged, what more is there to do than algorithmically digest these records and produce a result? i'm trying to understand what the necessary human element is in the operation of accounting firms. i imagine there are strategic aspects, i.e. how to categorize and structure future transactions?

alexarnesen 4y ago
the first pass is usually an algorithmic digest. the human element is required to recognize a subset of all transactions as requiring further analysis. some transactions require special consideration in either tax or reporting contexts. if every accounting system were a relational database, and every entry had multiple foreign keys to every appropriate classification, we could virtually eliminate CPA's. as it stands each accounting system is bespoke and idiosyncratic. some of them record transactions on sheets of paper. source: dating a CPA
- exit 4y ago
  > if every accounting system were a relational database, and every entry had multiple foreign keys to every appropriate classification, we could virtually eliminate CPA's. i'd like to hear it confirmed from additional sources but this is what i suspected. i also imagine those with the necessary skills to formalise these practices are (understandably) not eager to automate themselves out of the value capture loop.
ceejayoz 4y ago
There’s off-chain stuff happening. They use their holdings as collateral on riskier investments, like the commercial paper holdings Tether had. Humans have to untangle these, and sometimes that untangling reveals disaster.
- exit 4y ago
  > There’s off-chain stuff happening. sure, i'm asking about businesses in general and that's why i specified "properly logged"

21eleven 4y ago

It's ironic that crypto exchanges need to use accounting firms for audits when the whole point of a blockchain is to account for things.

soulofmischief 4y ago
It's because internal exchange transactions are not on-chain. When you deposit crypto to a typical exchange, it sits in a hot wallet or gets moved to cold storage. Any further transactions you make on the platform, such as exchanging currency, just shift around balances on a regular database. Only when you withdraw does it show on the chain. This is not a crypto problem.
- di456 4y ago
  There's no technical reason why internal accounting systems didn't post to a Blockchain based ledger. However most companies don't build their own accounting systems, it's too much of a liability and good luck getting an auditor to sign off on financials from something homegrown. And I not even sure if a commercial off the shelf blockchain-based accounting system exists, does one?
  - soulofmischief 4y ago
    > There's no technical reason why internal accounting systems didn't post to a Blockchain based ledger. I agree. Using the main chain obviously costs network fees, which for the high amount of transactions involved in running an exchange is untenable. However, there's no reason an exchange couldn't use its own public blockchain to allow independent auditing. > And I not even sure if a commercial off the shelf blockchain-based accounting system exists, does one? Not to my knowledge, and I know some crypto projects would love to use a product like this. Could be worth doing some market research.
    - di456 4y ago
      There is one market where I see a need for this, and it's OSS where transparency is important for building trust. However, what's holding any company back from releasing a read-only connection to their live financial systems?

bogomipz 4y ago

It's worth noting that that this is the same accounting firm which earlier this year retracted 9 years of "statements of financial condition" that they had prepared for The Trump Organization.[1]. The Trump Organization was found guilty of financial fraud earlier this month.[2]. These same Mazar statements are also at the center of another ongoing fraud case being brought by an Attorney General.[3] [1] https://www.nytimes.com/2022/02/14/nyregion/mazars-trump-organization-financial-statements.html https://www.nytimes.com/2022/02/14/nyregion/mazars-trump-org... [2] https://www.nytimes.com/live/2022/12/06/nyregion/trump-organization-trial-verdict https://www.nytimes.com/live/2022/12/06/nyregion/trump-organ... [3] https://www.nytimes.com/2022/09/21/nyregion/trump-fraud-lawsuit-ny.html https://www.nytimes.com/2022/09/21/nyregion/trump-fraud-laws...

dang 4y ago

Related ongoing thread: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work - https://news.ycombinator.com/item?id=34028921 https://news.ycombinator.com/item?id=34028921 - Dec 2022 (218 comments)