The fallout from FTX’s massive failure continues to spread, and anxiety and fear have now reached FTX’s big rival, Binance Exchange.
In the most recent bump on the road, global accounting firm Mazars suddenly stopped validating Binance’s “proof of reserves,” a document meant to prove that the firm has enough cash on hand to support client funds.
According to Binance, Mazars, which was recognized for cutting ties with former President Donald Trump relatively early this year, halted its work for all cryptocurrency businesses on Friday. This article is about the Binance exchange and whether it is about to crash. Let’s take a look at it in more detail.
Binance Exchange and its Proof of Reserves Report
Clients drained billions of dollars from the Binance exchange last week, which is just one reason why the company is under investigation in the immediate aftermath of the FTX implosion.
Concerned investors are watching for warning signs following the demise of FTX, the $32 billion crypto dynasty established by Sam Bankman-Fried. Some are concerned that breaches will start to appear on Binance.
Binance has had a rough few weeks. With outsized withdrawals, a possible future money laundering court case, and questions about the exchange’s proof of reserves, the exchange has seen a shit load in the last month or so. Fresh concerns have been raised about a $2.1 billion FTX refund, which CEO Changpeng Zhao (CZ) wisely declined.
Mazars, the auditing firm that collaborates with major cryptocurrency exchange Binance, stated on Friday that it has stopped all investigations for cryptocurrency industry players. Earlier this month, the audit team conducted a so-called reserve test inspection on Binance’s bitcoin assets, revealing that its reserves in just one day at the end of November were overcollateralized.
Why is There a Potential Crash of Binance?
Here are the three things you need to know about Binance’s progress and why the cryptocurrency market is worried about Binance’s potential crash.
First, the US Department of Justice is investigating Binance’s adherence to securities fraud legislation. According to Reuters, investigators are evaluating whether to initiate criminal proceedings against the company’s founder, Changpeng Zhao, and other top executives. These would include conspiracy to evade taxes, illegal money transmission, and criminal penalty violations. According to Reuters, Binance leaked more than $10 billion in accounting fraud in 2022 and tried to avoid regulatory bodies, which the cryptocurrency giant rejected.
Second, Binance has seen a huge increase in withdrawals of late as fears over its deposits and a Justice Department investigation flourished. Meanwhile, the arrest of FTX founding member Bankman-Fried further deteriorated confidence in the virtual currency.
Third, Changpeng Zhao, CEO of Binance, has accelerated his efforts to calm client fears about Binance’s bank reserves. He has tried to fight against everything he calls “FUD”: the spread of unreasonable fear, uncertainty, and confusion.
In short, while the cryptocurrency business has been fairly quiet in terms of attacks and bugs in recent months, events such as the increase in user withdrawals, the effects of the FTX implosion, as well as the arrest of SBF, imply that trust in centralized exchanges has begun to suffer.
By Audy Castaneda
