While the lawsuit between Binance and the SEC continues, some suspicious findings have emerged. The exchange regulator expressed concerns about the reserves held by Binance entities in the United States.
The latest findings by external auditor Adam Cochran have raised concerns about the exchange’s solvency and management of client assets. “If your own external auditor can’t tell you that you’re fully covered, that’s a problem,” Cochran said, noting the findings. said. Cochran also emphasized that the exchange relies on the “Ceffu” wallet custody system, previously known as Binance Custody. According to Cochran, this system serves both Binance International and Binance US.
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If your own external auditor can't say you are "fully collateralized" when you are supposed to be a 100% reserves exchange, and have your own proof-of-reserves that claims you're OVERCOLLATERALIZED that is a problem. https://t.co/pXGgnO8OOL
— Adam Cochran (adamscochran.eth) (@adamscochran) September 18, 2023
The question posed by Cochran fueled the debate: “If the “Ceffu” system is dealing with the exchange’s possibly smaller operations, how can it manage huge international numbers efficiently?”
Binance controller asks about reserves
The auditor’s statements emerged following Binance’s legal application on Friday, September 15. The exchange objected to many SEC requests, including auditor filings.
The request in the report stated that BAM Trading was “dependent on the exchange custodian to tell us the addresses where the assets are located,” which “makes it very difficult to ensure that the Company is fully collateralized at certain times.”
The SEC has previously cited this finding. The document in question, which was first sent on May 22, referred to the deficiency letter that the auditor sent to BAM Trading 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 the exchange” and noted that it relied on the exchange for this information.
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