Famous hedge fund manager Michael Burry, known for correctly predicting the 2008 financial crisis, believes that audits of cryptocurrency exchanges like Binance and FTX are pointless. He said that when he first began using credit default swaps, the auditors were “learning on the job” and that it is still the same with crypto exchanges.
Michael Burry Doubts Crypto Audits
Prominent investor and Scion Asset Management founder Michael Burry opined on Friday that proof-of-reserves audits of cryptocurrency trading platforms such as Binance and FTX are useless.
Burry achieved fame for being the first person to successfully predict the subprime mortgage crisis in the United States from 2007 to 2010. His story was documented in Michael Lewis’ book “The Big Short,” which was later adapted into a movie starring Christian Bale.
In response to news that accounting firm Mazars Group had suspended its proofs-of-reserves audits of crypto companies, Burry tweeted:
This is a problem in the solution. In 2005, when I began using a new credit default swap type, our auditors were still learning the ropes. That’s not good. The same applies to FTX, Binance, etc. The audit is meaningless.
The message was in reference to a Bloomberg article that reported on how the French accounting firm had stopped providing crypto firms with proofs-of-reserves audits due to intense media scrutiny, doubts over the publication of test reserves reports, and indications that the audits did not reassure the markets. Binance, Cryptowww..com and Kucoin were among the companies affected.
The news sparked criticism from Kraken CEO Jesse Powell, who denounced Binance for its Mazars-audited proofs-of-reserves. This week, over $3 billion has been withdrawn from Binance.
During a CNBC interview on Thursday, Binance CEO Changpeng Zhao (CZ) was asked why his exchange does not use any of the Big Four accounting firms (Deloitte, EY and KPMG Pricewaterhousecoopers (PwC)) to audit its books and, if the crypto company was unable or unwilling to provide data and files for auditors to review, to give their seal of approval. The Binance boss simply replied:
Many of them don’t even know how to audit crypto exchanges.
What are your thoughts on Michael Burry’s comment about audits of cryptocurrency exchanges? Let us know in the comments section below.
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