23 ms·

Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work

412 points by thm 4y ago

belltaco 4y ago
>Both KuCoin and Crypto.com said they had provided customers with the ability to verify their own holdings individually online. How does this even work?
- dd36 4y ago
  Good question! I can’t even guesstimate.
  - deleted 4y ago
    [deleted]
- the_mitsuhiko 4y ago
  Smoke and mirrors :)
- gabcoh 4y ago
  I don't know what crypto.com or KuCoin did, but here are some cryptographic schemes for proof of solvency Vitalik wrote up post-ftx collapse: https://vitalik.ca/general/2022/11/19/proof_of_solvency.html https://vitalik.ca/general/2022/11/19/proof_of_solvency.html
- Closi 4y ago
  Looks like someone external does an audit(1), and then the auditor creates a Merkle tree which you can then validate (by a Markle leaf which you can access from your account). Specifically for Crypto.com the auditors: > obtained and inspected the scripts used by management to extract the Customer Liability Report from the database. Based on management’s explanation of the various parameters we ensured that the logic and the parameters are designed to extract a complete and accurate listing of client liability balances of the In-Scope Assets as at 00:00:00 UTC on 7 December 2022 while excluding any company internal accounts. It was found that the script was queried against the latest production data at the time of the data extract, which showed latest updated time as of 23:59:59 UTC on 6 December 2022. We observed management access the database and execute the scripts to extract the relevant data from the database. We subsequently obtained the data produced from management (i.e. the Customer Liability Report) and performed a row count and sum check on the data set. We did not identify any discrepancies based on the row count and sum check performed. > Using the Mazars’ Silver Sixpence Merkle Tree Generating tool, we aggregated the client data obtained from management in this procedure and computed the Merkle Root Hash. The Hash for the Merkle Root based on the information supplied in procedure 6 is e535cf418ab603cc4b338069a814037d53 c50bf37dc5776631f3d9c3110e08af So you do still have to trust the audit, and assume no foul-play, because I think this just shows that your balance was included in the audit (as a liability). I believe this just stops Binance from being able to hide customer liabilities from Mazars. * (1) In Binance's case this wasn't actually an audit, and Mazars did this piece of work with Binance assuming good-faith according to processes mutually agreed between Mazars and Binance. As per the Mazars disclaimer, "This AUP engagement is not an assurance (financial audit) engagement. Accordingly, we do not express an opinion or an assurance conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported". I would note that IMO the Binance page does use the word "Auditor" a lot on the PoR page which might be slightly misleading (they are an auditor, but they aren't financially auditing Binance...?).
- xlbuttplug 4y ago
  https://www.kraken.com/proof-of-reserves https://www.kraken.com/proof-of-reserves
  - asah 4y ago
    Shortcomings and Future Improvements In the interest of championing transparency, we would like to share some of the shortcomings in the Proof of Reserves process that we’ve identified. A Proof of Reserves involves proving control over on-chain funds at the point in time of the audit, but cannot prove exclusive possession of private keys that may have theoretically been duplicated by an attacker. The procedure cannot identify any hidden encumbrances or prove that funds had not been borrowed for purposes of passing the audit. Similarly, keys may have been lost or funds stolen since the latest audit. The auditor must be competent and independent to minimize the risk of duplicity on the part of the auditee, or collusion amongst the parties.
- flotzam 4y ago
  https://niccarter.info/proof-of-reserves/ https://niccarter.info/proof-of-reserves/ has a lot of info in general and about specific exchanges
- ProAm 4y ago
  > How does this even work? Matt Damon tells them.
anon223345 4y ago
Isn’t Mazdas trumps accounting firm lol
jcpham2 4y ago
Keep it coming. If the entity is solvent this isn’t a problem. Nothing like a good ‘ol stress test
CharlesW 4y ago
Archive: https://archive.vn/DGfCg https://archive.vn/DGfCg
jacquesm 4y ago
Mazars is likely wondering if they are going to be the next Arthur Andersen before this is all over. Good luck finding another firm when one of the top firms in the world drops you like a hot potato.
- rchaud 4y ago
  They haven't done anything wrong AFAIK; they didn't sign off on an audit, and withdrew, which is the reality of many smaller accounting practices taking on unfamiliar clients. Arthur Anderson knowingly fudged the numbers at Enron, and provided both accounting and consulting services, which was a big conflict of interest. The consulting arm came up with new type of revenue opportunities (energy contracts), and the accounting arm cooked the books to show that these were profitable.
  - jacquesm 4y ago
    Mazars has already been cautioned - together with BDO - regarding their oversight on crypto, the regulators have essentially told them to improve their quality before they grow these branches of their corporation further. That puts them on petty thin ice. Arthur Andersen messed up big time, not in the least because their Chinese walls failed in every way imaginable but the parallel is pretty close: all of these companies are chasing new markets with abandon when in fact they should out of caution rather than regulatory pressure slow down and do their jobs properly because the financial world depends to a very large extent on that.
  - josh2600 4y ago
    It’s actually so nuts. People rarely get into the details of how crazy accounting was in Enron. They made an agreement to build a power plant, then booked 50 years of profit from operating it before they broke ground.
    - Bayart 4y ago
      I knew about accounting for lifetime costs, but accounting for lifetime profits is a new one hahaha.
janakalin 4y ago
FTX was also audited by a top firm, Armanino!Changed nothing... In the article says: Following the collapse of FTX, Paul MacIntosh, EY’s US financial services crypto co-leader, said on LinkedIn that proof of reserves reports do not assess companies’ internal controls, “which ultimately was the downfall of FTX”.
- xhkkffbf 4y ago
  Exactly. And people act like this is a problem with cryptcurrency, but it's really a problem with people in corporations behaving badly.
  - hef19898 4y ago
    Only that crypto is so unregulated that is hard to define what to audit against. And FTX wad never fully audited anyways, something which woupd be impossible with non-crypto equivalents of whatever FTX was beyond a major scam.
    - CuriousCosmic 4y ago
      Exactly. However the serious participants in the cryptocurrency space have been begging for regulation. The complaint however is that the regulations that have been proposed are trying to pidgeonhole the different parts of digital assets and decentralised finance (not defi but decentralised financial services as a whole) into existing categories that they don't cleanly fit in. Cryptocurrency for example isn't a commodity (representation of a resource) or a security(representation of ownership/control in an organisation/system). It can never fit cleanly under one definition or the other. Some tokens would fit cleanly under the definition of a security, some under the definition of a commodity, and some cleanly under neither. Likewise, node, relay, and validator operators for networks don't really fit cleanly under any given existing set of regulatory guidelines. Regulations for Money Service Businesses for example are overly restrictive and essentially outlaw any existing cryptocurrency operator from even attempting to operate in the US. It's not that the stated goals are impossible to comply with but rather that the specifics of the regulations are. Conversely, some of the much laxer proposed regulations wouldn't adequately cover operators and would leave the door open to abuses. AML and KYC regulations are particularly problematic. They mean well and the spirit of the regulations should be adhered to but they have not been written in a way that is compatible with this tech. Networks with privacy preserving transactions can comply with AML & KYC. Projects on those networks can as well. It won't however be in a way compliant with the direct reporting of user identities. Even if you wanted to comply with KYC & AML, you physically couldn't. Instead you can build infrastructure to comply KYC and AML via DIDs, ZK-proofs, and conditional release of private information (via functional encryption and a number of other techniques). There's a multitude of ways to handle the regulatory complexity without legally crippling privacy preserving & decentralised tech. It just requires that regulators actually work with the communities that have been trying to do things proper and kosher. Instead regulators have essentially ignored the industry's requests & proposals in whole, claimed to have heard nothing, and plowed forward with pushing regulations that would cripple the legitimately useful technology in the space.
nayuki 4y ago
> “We are financially OK,” said Zhao Where have we heard this before? Oh yeah: <Twitter @SBF_FTX> FTX is fine. Assets are fine.
- jacquesm 4y ago
  Interesting how the players change but the script is exactly the same and yet, people keep falling for it. I really don't get it. I once knew some people that were up to their necks in an MLM/pyramid scheme, it was like a cult, no matter how many examples you gave them of people ending up losing their shirts they would buy more of the crap and stuff it in every nook and cranny of their house being sure that they were the ones to cash out this time. Only they weren't. If you have any money at all at one of those crypto companies get it out now, don't wait to see if this time it will be different because it won't be.
  - CamelCaseName 4y ago
    I mean what else are they supposed to say?
    - VLM 4y ago
      "I invested my families money or corporate funds in a lower yielding account resulting in me being poor or having gotten fired from my pension management advisory position years ago". Chase that yield, or get replaced by someone who will.
  - epolanski 4y ago
    You would be surprised at human greed. Was it last week when there was an interview with several "investors", and pretty much all of them admitted they knew they were speculating in a highly volatile and unregulated market before they lost all their savings in FTX' crash? They knew the risks, they tried anyway, some really needed that money.
    - akudha 4y ago
      It is greed for sure. But it is also the lack of legit opportunities to invest, unless one is an accredited investor. I found a handful of places I wanted to invest, but I can't, because I am not an accredited investor. I am left with stock market and crypto. It is super funny (sad?) that I can go to Vegas and blow up my life savings in a matter of hours. There are no rules to save me from that. But there are rules conveniently banning non-accredited investors from so many legit investment opportunities. What % of the population are accredited investors? I bet it is not even 10% At this point, there doesn't seem to be any difference between Vegas and Crypto...
seydor 4y ago
What a misleading title > However, the accounting firm said on Friday that it had “paused its activity relating to the provision of proof of reserves reports for entities in the cryptocurrency sector due to concerns regarding the way these reports are understood by the public”. According to communications seen by the Financial Times, the level of media focus on the matter was also a factor in Mazars’ decision ... Mazars’ decision to halt work on proof of reserves reports was not driven by specific financial problems at any of the companies, said a person briefed on its decision. The firm’s work was so limited that it had “not looked that much” into the financial position of the companies ... Some people at Mazars feared that despite caveats in its reports the firm was “lending credibility to a very volatile sector” and felt it had been “naive” and “silly” to take on the work, the person added. Nothing indicating that audit did not go well, but that because of its limited scope, the auditor wants to avoid bad PR. Binance being an exchange, they make money whether cash goes in or out. so outflows are in a way good business?
- lobochrome 4y ago
  Except there was no audit, only an attestation. Outflows are as good as they were for FTX - if there is no 100% coverage of customer deposits.
  - jacquesm 4y ago
    Chartered accounts are liable for their work. Both Mazars and BDO have already been warned by the UK regulators their oversight is insufficient in July of this year. If they end up being associated with Binance and Binance goes under it could well take Mazars with it, there is good precedent for that, see Enron and Arthur Andersen.
- itake 4y ago
  Less money on the exchange means less money to be traded
- pifm_guy 4y ago
  Outflows are good business only if you are fully backed....
imhoguy 4y ago
Proof of reserves != proof of liabilities. Proof today != proof tomorrow.
- xlbuttplug 4y ago
  The proof of reserves can be done in such a way that each user can verify that their balance is backed: https://www.kraken.com/proof-of-reserves https://www.kraken.com/proof-of-reserves > Proof of reserves today != proof of reserves tomorrow. You should be able to detect large outflows/inflows from/to their wallets and demand an explanation.
  - danuker 4y ago
    Coffeezilla demanded explanations from Tether. None were offerred. https://www.youtube.com/watch?v=-whuXHSL1Pg https://www.youtube.com/watch?v=-whuXHSL1Pg
    - xlbuttplug 4y ago
      Providing a proof of reserves is about putting user/investor minds at ease. If you're not willing to go all the way, why bother doing it at all? Though I guess post FTX, all exchanges are scrambling to avoid losing a large chunk of their userbase. Claiming to have a proof of reserves, even if it was done in a half-assed and non transparent way, is probably good enough for the non-scrutinous user.
  - beefield 4y ago
    How does Kraken/proof of reserves ensure that in case of bankruptcy there are no creditors with higher privileges?
    - xlbuttplug 4y ago
      That's a good point. The exchange's remaining liabilities outside user deposits are still an unknown. (Or at least can't be verified in a trustless manner.)
ProjectArcturis 4y ago
"To prepare a proof of reserves report, an auditor uses procedures agreed with the company but does not vouch for whether those procedures are appropriate. The auditor also does not give any assurance or opinion over the numbers in the report, as it would in a full financial audit." What does it say that a lower-tier accounting firm wouldn't even complete this garbage process?
- jacquesm 4y ago
  Mazars is not lower tier. They're not in the big four but they are quite large and well respected, at least they were until they - and BDO, another large accounting firm - were flagged as insufficient in terms of oversight by the UK regulators. See: https://www.bloomberg.com/news/articles/2022-07-20/mazars-bdo-audit-quality-unacceptable-uk-watchdog-says https://www.bloomberg.com/news/articles/2022-07-20/mazars-bd... So they're on thin ice and they will not risk going down with this particular ship.
  - ProjectArcturis 4y ago
    >Mazars is not lower tier. I don't know much about European accounting firms. But the rest of your comment seems to contradict your initial claim -- i.e. they are not Big Four and they have had a recent scandal.
    - jacquesm 4y ago
      They are in the top 10 in my country and in many others, and they have been cautioned, which is regulator speech for 'improve your act or we'll go after you'. That means that they are on thin ice with respect to any future mistakes (specifically in their crypto division) and that their reputation (for the whole company) is at risk. The effect is that they will go through their customer portfolio and decide which ones they feel are negatively affecting their risk profile and apparently this is one risk that they are not willing to take. If this was a canary in the coalmine it just started wheezing strangely and it looks a little dizzy.
      - 4y ago
fritzo 4y ago
Why doesn't Binance flex and encourage a complete withdrawal by say Jan 1? Wouldn't that kind of power move boost its reputation above all competitors?
- jacquesm 4y ago
  Chances are they'll be dead if enough people act on that. So they're doing the opposite: reassuring people that everything is fine. If there is one common element that precedes every bank run and run on crypto exchanges and such then it is the 'everything is fine' phase just prior to the implosion.
  - hn_throwaway_99 4y ago
    One clarification: 1. For a bank run on an actual bank, it is known that a bank doesn't keep all your assets on hand - they are loaned out, which is (largely) what allows you to earn interest. So it is known that if everyone tries to withdraw at the same time that there won't be enough money. 2. For an exchange/brokerage, your money/assets are explicitly NOT supposed to be lent out without your permission. So, in theory, if everyone asked for their assets all at once, the assets should be there.
    - jacquesm 4y ago
      Indeed. But we already have a whole bunch of examples of (2) where the funds ended up in all kinds of places where they should not have been.
    - wkdneidbwf 4y ago
      these are the key points that get overlooked. i keep seeing that folks expect these brokerages to work like banks work.
      - jacquesm 4y ago
        The problem is that these brokerages do work like banks work but pretend that they are holding all of the reserves on the books. They are leveraging and borrowing from the customer funds with abandon, just like a bank but without the associated regulatory oversight and rulebooks.
wkdneidbwf 4y ago
thank you
- dang 4y ago
  Nothing wrong with saying thank you! but just to save space at the top of the thread, I detached this comment from https://news.ycombinator.com/item?id=34029007 https://news.ycombinator.com/item?id=34029007.
theknocker 4y ago
Animats 4y ago
"Binance has said it holds more than $60bn in assets, enough to honour withdrawals. The company’s disclosures do not include its liabilities, which makes it difficult to ascertain its financial health." Possibilities: 1) They're insolvent. Liabilities exceed assets. (Like FTX.) 2) Their accounting is so screwed up they can't produce a balance sheet. (Like FTX). 3) They have a large number of interconnected corporate entities and nobody has the big picture. (Like FTX). 4) They have enough assets on the books to look solvent, but many of those assets are overvalued or internal transactions. (Like FTX). OK, crypto people. Full GAPP audit or we all assume you're broke. If you have assets in an un-audited exchange, get them out now.
- janejeon 4y ago
  It is telling that a firm like Jump Crypto has pulled hundreds of millions of dollars from Binance. If smart money is getting out, you might want to get out before the doors close: https://www.coindesk.com/markets/2022/12/13/binance-withdrawals-surge-as-concerns-about-its-reserve-report-spook-traders/ https://www.coindesk.com/markets/2022/12/13/binance-withdraw...
- jacquesm 4y ago
  Exactly, and one more: they may have been shuttling money around from account to account to look solvent but aren't.
  - janejeon 4y ago
    Isn't this exactly what Tether is accused of doing?
  - marvin 4y ago
    Someone mentioned the early-banking era wheelbarrow of gold travelling around from bank to bank just in time to make the audit.
    - jacquesm 4y ago
      That's such a funny mental image, seeing the guys with the wheelbarrow trying to make it to the bank just in time for the auditors to appear and everybody is sitting around like it's perfectly normal and trying not to breathe too hard.
esalman 4y ago
- Jamie9912 4y ago
  A scam with real world use cases? Like internet? right?
- tofuahdude 4y ago
  It is more accurate to separate software from the people operating businesses that use the software. There are MANY (so, so many) scams in crypto, but the underlying protocols are just protocols. Just like there are MANY (so, so many) scams that operate with dollars and in the traditional banking system. Humans are gonna be humans.
  - jerrygenser 4y ago
    True but is there a positive ROI in sight for the amount invested in these solutions searching for a problem?
godzillabrennus 4y ago
Even an audited exchange like Coinbase that is trying to do everything right is still self reporting loses like $430M in quarter 1 of 2022 just by operating their business correctly. Not your keys, not your crypto. Anyone storing their crypto on any exchange has this risk.
- jacquesm 4y ago
  For now at least with Coinbase it is the investors funds at risk, not the customers funds. And that example shows how hard it is to run such a business profitably.
  - ta988 4y ago
    So what does that tell about the exchanges that are managed in an unauditable way...
    - jacquesm 4y ago
      Essentially that they are most likely dipping in to support either their operations or other projects from the customer funds. That's not proof, but I would not at all be surprised if there isn't a single one of them that is clean.
      - jrumbut 4y ago
        There is also the possibility that they have too many assets due to participating in money laundering or tax evasion. There really aren't a lot of good possibilities here, how did these exchanges get so large before anyone thought of audits?
        vineyardmike 4y ago
        > how did these exchanges get so large before anyone thought of audits? Who said no one thought of this? There was simply no one to enforce this. Look at Coinbase. They made a point of being “regulated in the US”. They’re audited. They’re legit (most likely. I’m not the auditor). They’re complying with disclosure laws as a publicly traded company. Look at Patio11, he’s been publicly making claims about tether and the crypto ecosystem for years. If it all blows up and his speculation /research was right, then who is to blame? We’ll have years of boy crying wolf and we thought it was a sheep.
protoc 4y ago
People they do not lose everything this round of collapse will invest in the next round... lol
throwawadgv 4y ago
In the next 6 months binance will go bankrupt. Run as fast as you could
- jacquesm 4y ago
  Months?
- Nifty3929 4y ago
  They might - but this doesn't imply any wrongdoing. Maybe everybody will be able to cash out and get all their money back - but then at that point there's no business left for Binance and they go bankrupt. Or, of course, the usual and everybody get hosed.
ta988 4y ago
There is a reason why banks have stress tests. And there is no reason this shouldn't apply to exchanges.
- dougSF70 4y ago
  The seem to be banks and exchanges. NYSE and Nasdaq are exchanges but don't hold customer funds they execute trades and that is it. These crypto exchanges are more like banks...and that is the problem. Until banks allow crypto accounts and connection to exchanges this will keep happening.
  - tbrownaw 4y ago
    Something closer to a retail brokerage, maybe?
    - dougSF70 4y ago
      And they shouldnt be allowed to trade or issue tradeable tokens. Something like the Glass-Stegall act, abolished by Clinton.
    - lottin 4y ago
      They're like an exchange and a brokerage firm rolled into one.
paulpauper 4y ago
yeah this is a major misleading headline. they did this for everyone, not just binance
ryloric 4y ago
This feels a lot like how a credit crunch happens with regular money. "Coins you own keys to = Coins in some online wallet = coins on exchanges = coins you lent out for interest" is the assumption everyone makes. They're all different types of assets but normal market conditions create the illusion they're all one and the same. There's 1 <-> 1 exchange possible, you can easily move coins from an exchange to your wallet, so they must be the same right? No. When shit hits the fan, all those links break down and then there's no convertibility. Only what you really own is what you own. With normal money, atleast there's Fed so they can actually do something about it and stop the links from breaking down completely, here there's no backstop.
- jacquesm 4y ago
  And if the funds are held in a regular account the Fed or other local institution like that will likely make you whole up to a point (usually $100K or thereabouts). As soon as you go unregulated that is no longer the case.
  - ryloric 4y ago
    FDIC, they collect fees from all banks to finance the fund they pay out account holders from. Limit increased too I think, like 250k now.
    - xapata 4y ago
      FDIC insures assets in US bank accounts. SIPC insures assets in US brokerage accounts.
deleted 4y ago
[deleted]
tomjpandolfi 4y ago
Binance has seen much worse. Binance is shady, but a lot of people in this thread are falling for bear market panic seekers.
- ProAm 4y ago
  This is a MLM scheme that is dissolving in front of it's members.
- oblio 4y ago
  Do you have any vested interest in Binance or associated companies/individuals/enteprises?
- jacquesm 4y ago
  Let's see how this comments looks in a while.
  - che_shirecat 4y ago
    yes, saving your comment for later
    - imtringued 4y ago
      Literally nobody cares about saved comments. Not even the person saving the comment. You will have to turn this into a bet with cash on the line if you actually mean it and I think bets are stupid so how about you just stop writing comments like that?
      - seydor 4y ago
        I think it's a performative figure of speech, as if "i disagree with your comment and i think i will end up being right". Not meant to be taken for its literal content
- seydor 4y ago
  why does one need a throwaway account to post this
fredgrott 4y ago
We have a problem here First implied statement: 1. Has funds to buy FTX Second implied statement: 2. has funds to send back due to fraud conveyance claw back Notice the pattern yet as not one implied statement has been stated as a direct statement. SBF showed the same amount of obfuscation. Not good folks.
funstuff007 4y ago
If they're in such dire straights, how is it $BNB is hanging there? Is Binance defending their own magic bean? What is the cost of doing so? https://finance.yahoo.com/quote/BNB-USD/ https://finance.yahoo.com/quote/BNB-USD/
- europeanguy 4y ago
  I'm not suggesting you're wrong, but would you care to clarify how exactly binance being "in dire straits" (in the sense of not being able to honor withdrawals, I presume you mean) would affect the value of BNB?
  - funstuff007 4y ago
    Yes, my poetic license path is very heavy withdrawals -> bank run -> dire straits (money for nothing pun). $60B in assets, $8B in withdrawals. Even if all the assets are correctly valued, I don't anyone would envy their position. But given their own coin in holding in there, maybe they are devoting some money to defend it, or maybe they are actually in decent shape and can handle this quasi bank run. More succinctly, if they were really toast, then $BNB would be cratering. Given it's holding in there, it seems they are OK (at this very instant in time).
    - europeanguy 4y ago
      > if they were really toast, then $BNB would be cratering Why exactly, though? That's what I'm asking. I promise I'm not trolling, I just don't understand the connection.
      - funstuff007 4y ago
        My presumption is Binance is the buyer of last resort for $BNB.
      - crtified 4y ago
        Well it has lost about one quarter of it's value VS Bitcoin in the past 3 weeks. Whether or not that fits the definition of cratering is up to the individual. 27 Nov: 1 BNB = 0.0188 Bitcoin; 17 Dec: 1 BNB = 0.0142 Bitcoin
dang 4y ago
Related ongoing thread: French accounting firm Mazars is pausing all its work with crypto firms - https://news.ycombinator.com/item?id=34026826 https://news.ycombinator.com/item?id=34026826 - Dec 2022 (39 comments)
not_enoch_wise 4y ago
A company under criminal investigation might have solvency issues? Someone got a set of pearls I can clutch? https://fortune.com/crypto/2022/12/12/binance-investigation-stalls-doj-disagrees/ https://fortune.com/crypto/2022/12/12/binance-investigation-...
- deleted 4y ago
  [deleted]
- dicomdan 4y ago
  Binance is China-owned so there's no problems, all criminal allegations are false, company is in great shape, and customer's assets are safe. What about Coinbase?
  - SturgeonsLaw 4y ago
    You're posting pro-Binance, pro-China comments all over this thread > company is in great shape, and customer's assets are safe Do you have any proof of this? I assume that to know this for sure, you would have some insight into Binance internals?
    - ericpauley 4y ago
      GP missing a /s.
    - jacquesm 4y ago
      The sarcasm is so thick that even a non-native like me picks it up.
      - SturgeonsLaw 4y ago
        The only thing thicker is me, apparently :P
        jacquesm 4y ago
firstSpeaker 4y ago
Any firm that survive the current ?recession? will have significantly more chance of surviving and passing the shivers. Maybe the next 6 months or so is critical for Binance or any other central wallet/exchange since people are on the edge.
prakhar897 4y ago
Both Binance and Coinbase have their "wallet" apps where u can get keys for your coins. They provide a slick interface to use them as well. However in this case, you are sharing your keys with the company which means: 1. they can pull your coins out anytime. 2. They can show your coins on their balance sheet which allows them to print more of their own coins (because they are backed by deposits).
- patch_cable 4y ago
  At least coinbase claims they keys remain on your device: https://help.coinbase.com/en/wallet/getting-started/what-s-the-difference-between-coinbase-com-and-wallet https://help.coinbase.com/en/wallet/getting-started/what-s-t... Do you have reason to believe this is not the case? Or are you more concerned about a malicious update to the app?
AceJohnny2 4y ago
> as the crypto exchange battles to avert a crisis of confidence. We used to call those a "bank run".
- koonsolo 4y ago
  No, a bank run is the consequence of fractional reserve system. Crypto exchanges should have 100% of their crypto covered by assets.
  - AceJohnny2 4y ago
    > should have lol
29athrowaway 4y ago
Not your keys, not your coins
- ineedasername 4y ago
  That outlook has severe limitations though. Specifically that self-custody has very high barriers to actually using those coins without having them pass through some more centralized system at some point. There’s no cash equivalent (as yet) that is as frictionless as actual cash. Maybe the next gen of tech tech that grows from these ashes will address that problem more directly, and get more traction than prior attempts by users learning from and demanding better than what they are getting now.
  - 29athrowaway 4y ago
    You just use the exchange when you want to trade not for long-term storage.
  - netheril96 4y ago
    Well, at least we can minimize the period when the keys are not ours. If we keep the coins only for a few days on the exchange, it is unlikely that the exchange falters just during that time. But if we keep it for years, it is likely we will lose it eventually.
pfoof 4y ago
Ok, so "web3-metaverse-blockchain" bubble is bursting, only the AI one is growing in a good direction.
- oblio 4y ago
  ML is backed by solid science from the 80's and we've always known it would have uses, we just didn't have the computing power for it.
  - nwienert 4y ago
    AI hasn’t threatened anything yet (in a not good way), so it hasn’t met regulation. Crypto threatened monetary systems, finance, VC, banks… and because of that attracted both all the money and all the ammunition from this recent QE hyper bubble. Now as it pops it’s very easy to say “look see it sucks,” but this shallow analysis, will it hold outside of the current recession? AI makes lots of splashy headlines but where’s the actual value outside upgrading existing big tech? Sure search and recommendations but what else? The artistic stuff gets tons of attention but what’s the market cap there - even Hollywood is small compared to finance. And as it does encroach on bigger industries it’ll face new problems: resistance from humans (copyright/regulation, cultural) and having to contend that by definition it produces “average” works. Like how remixed music became hugely popular and died off, AI produces remixed content, but humans want fresh. Look at music, film, fashion, anything really creative that AI looks like it’s edging in on - all those industries are driven by fresh content, new perspective. So I see it accelerating things but not revolutionizing, and as it’s very nature draws value from the masses and gives it to the few, it’ll eventually hit hard resistance from voters, unions. Meanwhile crypto has a ton of problems - UX, scaling, regulation - but it also has good fundamentals in that it stands to distribute power towards the masses and they drive adoption. And if there’s any trend in tech that’s been constant since the 70s it’s that the companies that can deliver value to the largest amount of people succeed. Am I super confident this is how it plays out? No, this is just a spitball. AI could solve the creativity issues, tech companies can make it seem consumer friendly through tons of persuasion, it may keep scaling well, and big tech can lobby like hell. Likewise crypto can’t outspend finance, and the bubbles and scammers have soured many. If you look at actual value both now and in the near future, AI is a lot of hot air, people love to share these new images but wheres the revolution in industry? Being both average and a theft at once, combined with being being easy to legislate via copyright is a bad combo.
pomyks 4y ago
Is it the same FT that wrote about poor Sam Bankman-Fried that would not be able to continue his altruism because of some errors? Keeping stuff at exchanges is a bad idea if you're not actively trading it and accept the risk. I got burned two times (cryptopia and ftx). I still think Binance is safe in terms of assets. People bring up that big part of the assets is in BUSD and BNB coins. But BUSD is issued by another company - Paxos and is fully collateralized. BNB could be somewhat a problem if it crashed, because it can be used as collateral in futures trading. That could cause liquidations and more selling, but it wouldn't make Binance less solvent in terms of assets/liabilities.
- hahaxdxd123 4y ago
  Stop misrepresenting publications. You can read what they've written about FTX here: https://www.ft.com/stream/555b8eaf-51c0-4d66-bbf3-dfe5dd0bcaaf https://www.ft.com/stream/555b8eaf-51c0-4d66-bbf3-dfe5dd0bca... Here's a fun one from April 2022 (before even Terraluna): "FTX/ Defi: If it looks like a duck and quacks like a duck . . ." https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc58b https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc...
professorTuring 4y ago
We will end up using good old banks to hold those assets… at least the regulations make them solvent. We need to read history and see what happened when the banks weren’t regulated enough and we are letting the crypto zoo run free and bankrupt many people. Such a bliss the “we don’t need traditional ecosystem to thrive”. I know how this is going to end, we will replicate the finance ecosystem into the cryptosystem. I still remember the “don’t be evil” slogan in google, let’s give random people the power to store all our crypto investment and let’s see what happens…

412 points by thm 4y ago

>Both KuCoin and Crypto.com said they had provided customers with the ability to verify their own holdings individually online. How does this even work?

dd36 4y ago
Good question! I can’t even guesstimate.
- deleted 4y ago
  [deleted]
the_mitsuhiko 4y ago
Smoke and mirrors :)
gabcoh 4y ago
I don't know what crypto.com or KuCoin did, but here are some cryptographic schemes for proof of solvency Vitalik wrote up post-ftx collapse: https://vitalik.ca/general/2022/11/19/proof_of_solvency.html https://vitalik.ca/general/2022/11/19/proof_of_solvency.html
Closi 4y ago
Looks like someone external does an audit(1), and then the auditor creates a Merkle tree which you can then validate (by a Markle leaf which you can access from your account). Specifically for Crypto.com the auditors: > obtained and inspected the scripts used by management to extract the Customer Liability Report from the database. Based on management’s explanation of the various parameters we ensured that the logic and the parameters are designed to extract a complete and accurate listing of client liability balances of the In-Scope Assets as at 00:00:00 UTC on 7 December 2022 while excluding any company internal accounts. It was found that the script was queried against the latest production data at the time of the data extract, which showed latest updated time as of 23:59:59 UTC on 6 December 2022. We observed management access the database and execute the scripts to extract the relevant data from the database. We subsequently obtained the data produced from management (i.e. the Customer Liability Report) and performed a row count and sum check on the data set. We did not identify any discrepancies based on the row count and sum check performed. > Using the Mazars’ Silver Sixpence Merkle Tree Generating tool, we aggregated the client data obtained from management in this procedure and computed the Merkle Root Hash. The Hash for the Merkle Root based on the information supplied in procedure 6 is e535cf418ab603cc4b338069a814037d53 c50bf37dc5776631f3d9c3110e08af So you do still have to trust the audit, and assume no foul-play, because I think this just shows that your balance was included in the audit (as a liability). I believe this just stops Binance from being able to hide customer liabilities from Mazars. * (1) In Binance's case this wasn't actually an audit, and Mazars did this piece of work with Binance assuming good-faith according to processes mutually agreed between Mazars and Binance. As per the Mazars disclaimer, "This AUP engagement is not an assurance (financial audit) engagement. Accordingly, we do not express an opinion or an assurance conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported". I would note that IMO the Binance page does use the word "Auditor" a lot on the PoR page which might be slightly misleading (they are an auditor, but they aren't financially auditing Binance...?).
xlbuttplug 4y ago
https://www.kraken.com/proof-of-reserves https://www.kraken.com/proof-of-reserves
- asah 4y ago
  Shortcomings and Future Improvements In the interest of championing transparency, we would like to share some of the shortcomings in the Proof of Reserves process that we’ve identified. A Proof of Reserves involves proving control over on-chain funds at the point in time of the audit, but cannot prove exclusive possession of private keys that may have theoretically been duplicated by an attacker. The procedure cannot identify any hidden encumbrances or prove that funds had not been borrowed for purposes of passing the audit. Similarly, keys may have been lost or funds stolen since the latest audit. The auditor must be competent and independent to minimize the risk of duplicity on the part of the auditee, or collusion amongst the parties.
flotzam 4y ago
https://niccarter.info/proof-of-reserves/ https://niccarter.info/proof-of-reserves/ has a lot of info in general and about specific exchanges
ProAm 4y ago
> How does this even work? Matt Damon tells them.

anon223345 4y ago

Isn’t Mazdas trumps accounting firm lol

jcpham2 4y ago

Keep it coming. If the entity is solvent this isn’t a problem. Nothing like a good ‘ol stress test

CharlesW 4y ago

Archive: https://archive.vn/DGfCg https://archive.vn/DGfCg

jacquesm 4y ago

Mazars is likely wondering if they are going to be the next Arthur Andersen before this is all over. Good luck finding another firm when one of the top firms in the world drops you like a hot potato.

rchaud 4y ago
They haven't done anything wrong AFAIK; they didn't sign off on an audit, and withdrew, which is the reality of many smaller accounting practices taking on unfamiliar clients. Arthur Anderson knowingly fudged the numbers at Enron, and provided both accounting and consulting services, which was a big conflict of interest. The consulting arm came up with new type of revenue opportunities (energy contracts), and the accounting arm cooked the books to show that these were profitable.
- jacquesm 4y ago
  Mazars has already been cautioned - together with BDO - regarding their oversight on crypto, the regulators have essentially told them to improve their quality before they grow these branches of their corporation further. That puts them on petty thin ice. Arthur Andersen messed up big time, not in the least because their Chinese walls failed in every way imaginable but the parallel is pretty close: all of these companies are chasing new markets with abandon when in fact they should out of caution rather than regulatory pressure slow down and do their jobs properly because the financial world depends to a very large extent on that.
- josh2600 4y ago
  It’s actually so nuts. People rarely get into the details of how crazy accounting was in Enron. They made an agreement to build a power plant, then booked 50 years of profit from operating it before they broke ground.
  - Bayart 4y ago
    I knew about accounting for lifetime costs, but accounting for lifetime profits is a new one hahaha.

janakalin 4y ago

FTX was also audited by a top firm, Armanino!Changed nothing... In the article says: Following the collapse of FTX, Paul MacIntosh, EY’s US financial services crypto co-leader, said on LinkedIn that proof of reserves reports do not assess companies’ internal controls, “which ultimately was the downfall of FTX”.

xhkkffbf 4y ago
Exactly. And people act like this is a problem with cryptcurrency, but it's really a problem with people in corporations behaving badly.
- hef19898 4y ago
  Only that crypto is so unregulated that is hard to define what to audit against. And FTX wad never fully audited anyways, something which woupd be impossible with non-crypto equivalents of whatever FTX was beyond a major scam.
  - CuriousCosmic 4y ago
    Exactly. However the serious participants in the cryptocurrency space have been begging for regulation. The complaint however is that the regulations that have been proposed are trying to pidgeonhole the different parts of digital assets and decentralised finance (not defi but decentralised financial services as a whole) into existing categories that they don't cleanly fit in. Cryptocurrency for example isn't a commodity (representation of a resource) or a security(representation of ownership/control in an organisation/system). It can never fit cleanly under one definition or the other. Some tokens would fit cleanly under the definition of a security, some under the definition of a commodity, and some cleanly under neither. Likewise, node, relay, and validator operators for networks don't really fit cleanly under any given existing set of regulatory guidelines. Regulations for Money Service Businesses for example are overly restrictive and essentially outlaw any existing cryptocurrency operator from even attempting to operate in the US. It's not that the stated goals are impossible to comply with but rather that the specifics of the regulations are. Conversely, some of the much laxer proposed regulations wouldn't adequately cover operators and would leave the door open to abuses. AML and KYC regulations are particularly problematic. They mean well and the spirit of the regulations should be adhered to but they have not been written in a way that is compatible with this tech. Networks with privacy preserving transactions can comply with AML & KYC. Projects on those networks can as well. It won't however be in a way compliant with the direct reporting of user identities. Even if you wanted to comply with KYC & AML, you physically couldn't. Instead you can build infrastructure to comply KYC and AML via DIDs, ZK-proofs, and conditional release of private information (via functional encryption and a number of other techniques). There's a multitude of ways to handle the regulatory complexity without legally crippling privacy preserving & decentralised tech. It just requires that regulators actually work with the communities that have been trying to do things proper and kosher. Instead regulators have essentially ignored the industry's requests & proposals in whole, claimed to have heard nothing, and plowed forward with pushing regulations that would cripple the legitimately useful technology in the space.

nayuki 4y ago

> “We are financially OK,” said Zhao Where have we heard this before? Oh yeah: <Twitter @SBF_FTX> FTX is fine. Assets are fine.

jacquesm 4y ago
Interesting how the players change but the script is exactly the same and yet, people keep falling for it. I really don't get it. I once knew some people that were up to their necks in an MLM/pyramid scheme, it was like a cult, no matter how many examples you gave them of people ending up losing their shirts they would buy more of the crap and stuff it in every nook and cranny of their house being sure that they were the ones to cash out this time. Only they weren't. If you have any money at all at one of those crypto companies get it out now, don't wait to see if this time it will be different because it won't be.
- CamelCaseName 4y ago
  I mean what else are they supposed to say?
  - VLM 4y ago
    "I invested my families money or corporate funds in a lower yielding account resulting in me being poor or having gotten fired from my pension management advisory position years ago". Chase that yield, or get replaced by someone who will.
- epolanski 4y ago
  You would be surprised at human greed. Was it last week when there was an interview with several "investors", and pretty much all of them admitted they knew they were speculating in a highly volatile and unregulated market before they lost all their savings in FTX' crash? They knew the risks, they tried anyway, some really needed that money.
  - akudha 4y ago
    It is greed for sure. But it is also the lack of legit opportunities to invest, unless one is an accredited investor. I found a handful of places I wanted to invest, but I can't, because I am not an accredited investor. I am left with stock market and crypto. It is super funny (sad?) that I can go to Vegas and blow up my life savings in a matter of hours. There are no rules to save me from that. But there are rules conveniently banning non-accredited investors from so many legit investment opportunities. What % of the population are accredited investors? I bet it is not even 10% At this point, there doesn't seem to be any difference between Vegas and Crypto...

seydor 4y ago

What a misleading title > However, the accounting firm said on Friday that it had “paused its activity relating to the provision of proof of reserves reports for entities in the cryptocurrency sector due to concerns regarding the way these reports are understood by the public”. According to communications seen by the Financial Times, the level of media focus on the matter was also a factor in Mazars’ decision ... Mazars’ decision to halt work on proof of reserves reports was not driven by specific financial problems at any of the companies, said a person briefed on its decision. The firm’s work was so limited that it had “not looked that much” into the financial position of the companies ... Some people at Mazars feared that despite caveats in its reports the firm was “lending credibility to a very volatile sector” and felt it had been “naive” and “silly” to take on the work, the person added. Nothing indicating that audit did not go well, but that because of its limited scope, the auditor wants to avoid bad PR. Binance being an exchange, they make money whether cash goes in or out. so outflows are in a way good business?

lobochrome 4y ago
Except there was no audit, only an attestation. Outflows are as good as they were for FTX - if there is no 100% coverage of customer deposits.
- jacquesm 4y ago
  Chartered accounts are liable for their work. Both Mazars and BDO have already been warned by the UK regulators their oversight is insufficient in July of this year. If they end up being associated with Binance and Binance goes under it could well take Mazars with it, there is good precedent for that, see Enron and Arthur Andersen.
itake 4y ago
Less money on the exchange means less money to be traded
pifm_guy 4y ago
Outflows are good business only if you are fully backed....

imhoguy 4y ago

Proof of reserves != proof of liabilities. Proof today != proof tomorrow.

xlbuttplug 4y ago
The proof of reserves can be done in such a way that each user can verify that their balance is backed: https://www.kraken.com/proof-of-reserves https://www.kraken.com/proof-of-reserves > Proof of reserves today != proof of reserves tomorrow. You should be able to detect large outflows/inflows from/to their wallets and demand an explanation.
- danuker 4y ago
  Coffeezilla demanded explanations from Tether. None were offerred. https://www.youtube.com/watch?v=-whuXHSL1Pg https://www.youtube.com/watch?v=-whuXHSL1Pg
  - xlbuttplug 4y ago
    Providing a proof of reserves is about putting user/investor minds at ease. If you're not willing to go all the way, why bother doing it at all? Though I guess post FTX, all exchanges are scrambling to avoid losing a large chunk of their userbase. Claiming to have a proof of reserves, even if it was done in a half-assed and non transparent way, is probably good enough for the non-scrutinous user.
- beefield 4y ago
  How does Kraken/proof of reserves ensure that in case of bankruptcy there are no creditors with higher privileges?
  - xlbuttplug 4y ago
    That's a good point. The exchange's remaining liabilities outside user deposits are still an unknown. (Or at least can't be verified in a trustless manner.)

ProjectArcturis 4y ago

"To prepare a proof of reserves report, an auditor uses procedures agreed with the company but does not vouch for whether those procedures are appropriate. The auditor also does not give any assurance or opinion over the numbers in the report, as it would in a full financial audit." What does it say that a lower-tier accounting firm wouldn't even complete this garbage process?

jacquesm 4y ago
Mazars is not lower tier. They're not in the big four but they are quite large and well respected, at least they were until they - and BDO, another large accounting firm - were flagged as insufficient in terms of oversight by the UK regulators. See: https://www.bloomberg.com/news/articles/2022-07-20/mazars-bdo-audit-quality-unacceptable-uk-watchdog-says https://www.bloomberg.com/news/articles/2022-07-20/mazars-bd... So they're on thin ice and they will not risk going down with this particular ship.
- ProjectArcturis 4y ago
  >Mazars is not lower tier. I don't know much about European accounting firms. But the rest of your comment seems to contradict your initial claim -- i.e. they are not Big Four and they have had a recent scandal.
  - jacquesm 4y ago
    They are in the top 10 in my country and in many others, and they have been cautioned, which is regulator speech for 'improve your act or we'll go after you'. That means that they are on thin ice with respect to any future mistakes (specifically in their crypto division) and that their reputation (for the whole company) is at risk. The effect is that they will go through their customer portfolio and decide which ones they feel are negatively affecting their risk profile and apparently this is one risk that they are not willing to take. If this was a canary in the coalmine it just started wheezing strangely and it looks a little dizzy.
    - 4y ago

fritzo 4y ago

Why doesn't Binance flex and encourage a complete withdrawal by say Jan 1? Wouldn't that kind of power move boost its reputation above all competitors?

jacquesm 4y ago
Chances are they'll be dead if enough people act on that. So they're doing the opposite: reassuring people that everything is fine. If there is one common element that precedes every bank run and run on crypto exchanges and such then it is the 'everything is fine' phase just prior to the implosion.
- hn_throwaway_99 4y ago
  One clarification: 1. For a bank run on an actual bank, it is known that a bank doesn't keep all your assets on hand - they are loaned out, which is (largely) what allows you to earn interest. So it is known that if everyone tries to withdraw at the same time that there won't be enough money. 2. For an exchange/brokerage, your money/assets are explicitly NOT supposed to be lent out without your permission. So, in theory, if everyone asked for their assets all at once, the assets should be there.
  - jacquesm 4y ago
    Indeed. But we already have a whole bunch of examples of (2) where the funds ended up in all kinds of places where they should not have been.
  - wkdneidbwf 4y ago
    these are the key points that get overlooked. i keep seeing that folks expect these brokerages to work like banks work.
    - jacquesm 4y ago
      The problem is that these brokerages do work like banks work but pretend that they are holding all of the reserves on the books. They are leveraging and borrowing from the customer funds with abandon, just like a bank but without the associated regulatory oversight and rulebooks.

wkdneidbwf 4y ago

thank you

dang 4y ago
Nothing wrong with saying thank you! but just to save space at the top of the thread, I detached this comment from https://news.ycombinator.com/item?id=34029007 https://news.ycombinator.com/item?id=34029007.

theknocker 4y ago

Animats 4y ago

"Binance has said it holds more than $60bn in assets, enough to honour withdrawals. The company’s disclosures do not include its liabilities, which makes it difficult to ascertain its financial health." Possibilities: 1) They're insolvent. Liabilities exceed assets. (Like FTX.) 2) Their accounting is so screwed up they can't produce a balance sheet. (Like FTX). 3) They have a large number of interconnected corporate entities and nobody has the big picture. (Like FTX). 4) They have enough assets on the books to look solvent, but many of those assets are overvalued or internal transactions. (Like FTX). OK, crypto people. Full GAPP audit or we all assume you're broke. If you have assets in an un-audited exchange, get them out now.

janejeon 4y ago
It is telling that a firm like Jump Crypto has pulled hundreds of millions of dollars from Binance. If smart money is getting out, you might want to get out before the doors close: https://www.coindesk.com/markets/2022/12/13/binance-withdrawals-surge-as-concerns-about-its-reserve-report-spook-traders/ https://www.coindesk.com/markets/2022/12/13/binance-withdraw...
jacquesm 4y ago
Exactly, and one more: they may have been shuttling money around from account to account to look solvent but aren't.
- janejeon 4y ago
  Isn't this exactly what Tether is accused of doing?
- marvin 4y ago
  Someone mentioned the early-banking era wheelbarrow of gold travelling around from bank to bank just in time to make the audit.
  - jacquesm 4y ago
    That's such a funny mental image, seeing the guys with the wheelbarrow trying to make it to the bank just in time for the auditors to appear and everybody is sitting around like it's perfectly normal and trying not to breathe too hard.

esalman 4y ago

Jamie9912 4y ago
A scam with real world use cases? Like internet? right?
tofuahdude 4y ago
It is more accurate to separate software from the people operating businesses that use the software. There are MANY (so, so many) scams in crypto, but the underlying protocols are just protocols. Just like there are MANY (so, so many) scams that operate with dollars and in the traditional banking system. Humans are gonna be humans.
- jerrygenser 4y ago
  True but is there a positive ROI in sight for the amount invested in these solutions searching for a problem?

godzillabrennus 4y ago

Even an audited exchange like Coinbase that is trying to do everything right is still self reporting loses like $430M in quarter 1 of 2022 just by operating their business correctly. Not your keys, not your crypto. Anyone storing their crypto on any exchange has this risk.

jacquesm 4y ago
For now at least with Coinbase it is the investors funds at risk, not the customers funds. And that example shows how hard it is to run such a business profitably.
- ta988 4y ago
  So what does that tell about the exchanges that are managed in an unauditable way...
  - jacquesm 4y ago
    Essentially that they are most likely dipping in to support either their operations or other projects from the customer funds. That's not proof, but I would not at all be surprised if there isn't a single one of them that is clean.
    - jrumbut 4y ago
      There is also the possibility that they have too many assets due to participating in money laundering or tax evasion. There really aren't a lot of good possibilities here, how did these exchanges get so large before anyone thought of audits?
      - vineyardmike 4y ago
        > how did these exchanges get so large before anyone thought of audits? Who said no one thought of this? There was simply no one to enforce this. Look at Coinbase. They made a point of being “regulated in the US”. They’re audited. They’re legit (most likely. I’m not the auditor). They’re complying with disclosure laws as a publicly traded company. Look at Patio11, he’s been publicly making claims about tether and the crypto ecosystem for years. If it all blows up and his speculation /research was right, then who is to blame? We’ll have years of boy crying wolf and we thought it was a sheep.

protoc 4y ago

People they do not lose everything this round of collapse will invest in the next round... lol

throwawadgv 4y ago

In the next 6 months binance will go bankrupt. Run as fast as you could

jacquesm 4y ago
Months?
Nifty3929 4y ago
They might - but this doesn't imply any wrongdoing. Maybe everybody will be able to cash out and get all their money back - but then at that point there's no business left for Binance and they go bankrupt. Or, of course, the usual and everybody get hosed.

ta988 4y ago

There is a reason why banks have stress tests. And there is no reason this shouldn't apply to exchanges.

dougSF70 4y ago
The seem to be banks and exchanges. NYSE and Nasdaq are exchanges but don't hold customer funds they execute trades and that is it. These crypto exchanges are more like banks...and that is the problem. Until banks allow crypto accounts and connection to exchanges this will keep happening.
- tbrownaw 4y ago
  Something closer to a retail brokerage, maybe?
  - dougSF70 4y ago
    And they shouldnt be allowed to trade or issue tradeable tokens. Something like the Glass-Stegall act, abolished by Clinton.
  - lottin 4y ago
    They're like an exchange and a brokerage firm rolled into one.

paulpauper 4y ago

yeah this is a major misleading headline. they did this for everyone, not just binance

ryloric 4y ago

This feels a lot like how a credit crunch happens with regular money. "Coins you own keys to = Coins in some online wallet = coins on exchanges = coins you lent out for interest" is the assumption everyone makes. They're all different types of assets but normal market conditions create the illusion they're all one and the same. There's 1 <-> 1 exchange possible, you can easily move coins from an exchange to your wallet, so they must be the same right? No. When shit hits the fan, all those links break down and then there's no convertibility. Only what you really own is what you own. With normal money, atleast there's Fed so they can actually do something about it and stop the links from breaking down completely, here there's no backstop.

jacquesm 4y ago
And if the funds are held in a regular account the Fed or other local institution like that will likely make you whole up to a point (usually $100K or thereabouts). As soon as you go unregulated that is no longer the case.
- ryloric 4y ago
  FDIC, they collect fees from all banks to finance the fund they pay out account holders from. Limit increased too I think, like 250k now.
  - xapata 4y ago
    FDIC insures assets in US bank accounts. SIPC insures assets in US brokerage accounts.

deleted 4y ago

[deleted]

tomjpandolfi 4y ago

Binance has seen much worse. Binance is shady, but a lot of people in this thread are falling for bear market panic seekers.

ProAm 4y ago
This is a MLM scheme that is dissolving in front of it's members.
oblio 4y ago
Do you have any vested interest in Binance or associated companies/individuals/enteprises?
jacquesm 4y ago
Let's see how this comments looks in a while.
- che_shirecat 4y ago
  yes, saving your comment for later
  - imtringued 4y ago
    Literally nobody cares about saved comments. Not even the person saving the comment. You will have to turn this into a bet with cash on the line if you actually mean it and I think bets are stupid so how about you just stop writing comments like that?
    - seydor 4y ago
      I think it's a performative figure of speech, as if "i disagree with your comment and i think i will end up being right". Not meant to be taken for its literal content
seydor 4y ago
why does one need a throwaway account to post this

fredgrott 4y ago

We have a problem here First implied statement: 1. Has funds to buy FTX Second implied statement: 2. has funds to send back due to fraud conveyance claw back Notice the pattern yet as not one implied statement has been stated as a direct statement. SBF showed the same amount of obfuscation. Not good folks.

funstuff007 4y ago

If they're in such dire straights, how is it $BNB is hanging there? Is Binance defending their own magic bean? What is the cost of doing so? https://finance.yahoo.com/quote/BNB-USD/ https://finance.yahoo.com/quote/BNB-USD/

europeanguy 4y ago
I'm not suggesting you're wrong, but would you care to clarify how exactly binance being "in dire straits" (in the sense of not being able to honor withdrawals, I presume you mean) would affect the value of BNB?
- funstuff007 4y ago
  Yes, my poetic license path is very heavy withdrawals -> bank run -> dire straits (money for nothing pun). $60B in assets, $8B in withdrawals. Even if all the assets are correctly valued, I don't anyone would envy their position. But given their own coin in holding in there, maybe they are devoting some money to defend it, or maybe they are actually in decent shape and can handle this quasi bank run. More succinctly, if they were really toast, then $BNB would be cratering. Given it's holding in there, it seems they are OK (at this very instant in time).
  - europeanguy 4y ago
    > if they were really toast, then $BNB would be cratering Why exactly, though? That's what I'm asking. I promise I'm not trolling, I just don't understand the connection.
    - funstuff007 4y ago
      My presumption is Binance is the buyer of last resort for $BNB.
    - crtified 4y ago
      Well it has lost about one quarter of it's value VS Bitcoin in the past 3 weeks. Whether or not that fits the definition of cratering is up to the individual. 27 Nov: 1 BNB = 0.0188 Bitcoin; 17 Dec: 1 BNB = 0.0142 Bitcoin

dang 4y ago

Related ongoing thread: French accounting firm Mazars is pausing all its work with crypto firms - https://news.ycombinator.com/item?id=34026826 https://news.ycombinator.com/item?id=34026826 - Dec 2022 (39 comments)

not_enoch_wise 4y ago

A company under criminal investigation might have solvency issues? Someone got a set of pearls I can clutch? https://fortune.com/crypto/2022/12/12/binance-investigation-stalls-doj-disagrees/ https://fortune.com/crypto/2022/12/12/binance-investigation-...

deleted 4y ago
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dicomdan 4y ago
Binance is China-owned so there's no problems, all criminal allegations are false, company is in great shape, and customer's assets are safe. What about Coinbase?
- SturgeonsLaw 4y ago
  You're posting pro-Binance, pro-China comments all over this thread > company is in great shape, and customer's assets are safe Do you have any proof of this? I assume that to know this for sure, you would have some insight into Binance internals?
  - ericpauley 4y ago
    GP missing a /s.
  - jacquesm 4y ago
    The sarcasm is so thick that even a non-native like me picks it up.
    - SturgeonsLaw 4y ago
      The only thing thicker is me, apparently :P
      - jacquesm 4y ago

firstSpeaker 4y ago

Any firm that survive the current ?recession? will have significantly more chance of surviving and passing the shivers. Maybe the next 6 months or so is critical for Binance or any other central wallet/exchange since people are on the edge.

prakhar897 4y ago

Both Binance and Coinbase have their "wallet" apps where u can get keys for your coins. They provide a slick interface to use them as well. However in this case, you are sharing your keys with the company which means: 1. they can pull your coins out anytime. 2. They can show your coins on their balance sheet which allows them to print more of their own coins (because they are backed by deposits).

patch_cable 4y ago
At least coinbase claims they keys remain on your device: https://help.coinbase.com/en/wallet/getting-started/what-s-the-difference-between-coinbase-com-and-wallet https://help.coinbase.com/en/wallet/getting-started/what-s-t... Do you have reason to believe this is not the case? Or are you more concerned about a malicious update to the app?

AceJohnny2 4y ago

> as the crypto exchange battles to avert a crisis of confidence. We used to call those a "bank run".

koonsolo 4y ago
No, a bank run is the consequence of fractional reserve system. Crypto exchanges should have 100% of their crypto covered by assets.
- AceJohnny2 4y ago
  > should have lol

29athrowaway 4y ago

Not your keys, not your coins

ineedasername 4y ago
That outlook has severe limitations though. Specifically that self-custody has very high barriers to actually using those coins without having them pass through some more centralized system at some point. There’s no cash equivalent (as yet) that is as frictionless as actual cash. Maybe the next gen of tech tech that grows from these ashes will address that problem more directly, and get more traction than prior attempts by users learning from and demanding better than what they are getting now.
- 29athrowaway 4y ago
  You just use the exchange when you want to trade not for long-term storage.
- netheril96 4y ago
  Well, at least we can minimize the period when the keys are not ours. If we keep the coins only for a few days on the exchange, it is unlikely that the exchange falters just during that time. But if we keep it for years, it is likely we will lose it eventually.

pfoof 4y ago

Ok, so "web3-metaverse-blockchain" bubble is bursting, only the AI one is growing in a good direction.

oblio 4y ago
ML is backed by solid science from the 80's and we've always known it would have uses, we just didn't have the computing power for it.
- nwienert 4y ago
  AI hasn’t threatened anything yet (in a not good way), so it hasn’t met regulation. Crypto threatened monetary systems, finance, VC, banks… and because of that attracted both all the money and all the ammunition from this recent QE hyper bubble. Now as it pops it’s very easy to say “look see it sucks,” but this shallow analysis, will it hold outside of the current recession? AI makes lots of splashy headlines but where’s the actual value outside upgrading existing big tech? Sure search and recommendations but what else? The artistic stuff gets tons of attention but what’s the market cap there - even Hollywood is small compared to finance. And as it does encroach on bigger industries it’ll face new problems: resistance from humans (copyright/regulation, cultural) and having to contend that by definition it produces “average” works. Like how remixed music became hugely popular and died off, AI produces remixed content, but humans want fresh. Look at music, film, fashion, anything really creative that AI looks like it’s edging in on - all those industries are driven by fresh content, new perspective. So I see it accelerating things but not revolutionizing, and as it’s very nature draws value from the masses and gives it to the few, it’ll eventually hit hard resistance from voters, unions. Meanwhile crypto has a ton of problems - UX, scaling, regulation - but it also has good fundamentals in that it stands to distribute power towards the masses and they drive adoption. And if there’s any trend in tech that’s been constant since the 70s it’s that the companies that can deliver value to the largest amount of people succeed. Am I super confident this is how it plays out? No, this is just a spitball. AI could solve the creativity issues, tech companies can make it seem consumer friendly through tons of persuasion, it may keep scaling well, and big tech can lobby like hell. Likewise crypto can’t outspend finance, and the bubbles and scammers have soured many. If you look at actual value both now and in the near future, AI is a lot of hot air, people love to share these new images but wheres the revolution in industry? Being both average and a theft at once, combined with being being easy to legislate via copyright is a bad combo.

pomyks 4y ago

Is it the same FT that wrote about poor Sam Bankman-Fried that would not be able to continue his altruism because of some errors? Keeping stuff at exchanges is a bad idea if you're not actively trading it and accept the risk. I got burned two times (cryptopia and ftx). I still think Binance is safe in terms of assets. People bring up that big part of the assets is in BUSD and BNB coins. But BUSD is issued by another company - Paxos and is fully collateralized. BNB could be somewhat a problem if it crashed, because it can be used as collateral in futures trading. That could cause liquidations and more selling, but it wouldn't make Binance less solvent in terms of assets/liabilities.

hahaxdxd123 4y ago
Stop misrepresenting publications. You can read what they've written about FTX here: https://www.ft.com/stream/555b8eaf-51c0-4d66-bbf3-dfe5dd0bcaaf https://www.ft.com/stream/555b8eaf-51c0-4d66-bbf3-dfe5dd0bca... Here's a fun one from April 2022 (before even Terraluna): "FTX/ Defi: If it looks like a duck and quacks like a duck . . ." https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc58b https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc...

professorTuring 4y ago

We will end up using good old banks to hold those assets… at least the regulations make them solvent. We need to read history and see what happened when the banks weren’t regulated enough and we are letting the crypto zoo run free and bankrupt many people. Such a bliss the “we don’t need traditional ecosystem to thrive”. I know how this is going to end, we will replicate the finance ecosystem into the cryptosystem. I still remember the “don’t be evil” slogan in google, let’s give random people the power to store all our crypto investment and let’s see what happens…