Binance Under Fire: Auditor Doubts Over Reserves Rattle Community

Recent findings by Binance’s external auditor raise concerns over the exchange’s solvency and management of customer assets.

Binance Ceo Changpeng Zhao looking pleased, whist Gary Gensler is is eyeing up his every move.
Created by Kornelija Poderskytė from DailyCoin
  • Auditor’s report raises questions about Binance’s reserves.
  • Binance’s use of the “Ceffu” wallet custody system is under scrutiny.
  • SEC is pushing for more transparency from Binance.  

Binance, the world’s leading cryptocurrency exchange, is at the center of a controversy. Its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC) highlighted some questionable findings by its auditor. Namely, the auditor has raised concerns over the reserves held by Binance entities in the US. 

Community Concerned Over Binance’s Reserves

The exchange is under increased scrutiny as the SEC case unfolds. Adam Cochran, a notable figure in the crypto community, has been vocal about his concerns, echoing the findings of Binance’s external auditor.

Cochran pointed to the findings by a Binance auditor, remarking that “If your own external auditor can’t say you are fully collateralized” that is a problem. 

Cochran also spotlighted the exchange’s reliance on the “Ceffu” wallet custody system, previously known as Binance Custody. According to Cochran, this system serves both Binance International and Binance US. 

A pressing question that Cochran posits is: if the “Ceffu” system struggles with the presumably smaller operations of Binance US, how can it efficiently manage the vast international numbers?

Binance’s Auditor Questions Reserves 

The auditor remarks in question came to light following Binance’s legal filing on Friday, September 15 came to light. The exchange raised objections to several SEC requests, including the auditor filings.

From the report, the request noted that BAM Trading “is dependent on the [Binance].com custodian to tell them the addresses holding the assets,” which “makes it very difficult to ensure the Company is fully collateralized at specific points in time.” 

The SEC made prior references to this finding. Originally sent on May 22, the document in question refers to a deficiency letter by the auditor to BAM Trading, sent on May 22. 

According to the SEC, the auditor stated that “the Binance.US team does not have much visibility into on-chain activity related to its exchange,” it relies on for that information. 

The SEC suggests that these findings demonstrate the undue influence of Binance over its US subsidiary. Binance responded that this request was “overbroad” and “unduly burdensome” and suggested that the parties meet and discuss this request. 

On the Flipside

  • The SEC’s lawsuit comes when crypto exchanges worldwide are facing increased scrutiny. 
  • The auditor’s findings do not suggest that Binance or its US subsidiaries are insolvent. 

Why This Matters

The ongoing legal battle between the SEC and Binance will set a precedent for how cryptocurrency exchanges are regulated in the U.S.

Read more about the recent panic surrounding Binance withdrawals:
Major Binance Withdrawal Issue Claims Stoke Insolvency Fears

Read more news about the controversial crypto influencer Ben Armstrong:
BitBoy Crypto’s Ben Armstrong Exits FTX Influencer Lawsuit

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

David Marsanic

David Marsanic is a journalist for DailyCoin who covers the intersection of crypto, traditional finance, and government. He focuses on institutionalized crypto entities like major cryptocurrency exchanges and Solana, breaking down complex topics into easy-to-understand writing. David's prior experience as a business journalist at various crypto and traditional news sites has enabled him to maintain a critical approach to news while adhering to high journalistic integrity standards.