Ronaldo slapped with class-action lawsuit over Binance promo
Christiano Ronaldo is facing a class action lawsuit over his NFT collection promotion in partnership with Binance.
While Binance takes steps to improve the transparency of its reserve funds, it has also exposed itself and “red flags” in its finances according to The Wall Street Journal.
Binance’s “proof of reserve” report doesn’t address effectiveness of internal financial controls, doesn’t express an opinion or assurance conclusion and doesn’t vouch for the numbers. I worked at SEC Enforcement for 18+ yrs. This is how I define “red flag. https://t.co/6oEqmArjS9
— John Reed Stark (@JohnReedStark) December 11, 2022
The report comes from financial specialists from The WSJ, and notes that the exchange’s finances lack information about whether the internal controls are in place as well as no information about how Binance can liquidate assets in order to cover margin loans. Binance also does not provide enough information about how it is structured. According to research in the report, Patrick Hillmann, the chief strategy officer of Binance could not name Binance’s parent company.
Furthermore, there were discrepancies in the the total Bitcoin liabilities in the crypto exchange. Because the proof of reserves indicates that the exchange has 97% collateralised assets, the 1:1 ratio of reserve is not able to stand. As per the report:
“We found that Binance was 97% collateralized without taking into account the Out-Of-Scope Assets pledged by customers as collateral for the In-Scope-Assets lent through the margin and loans service offering resulting in negative balances on the Customer Liability Report. With the inclusion of In-Scope Assets lent to customers through margin and loans which are overcollateralized by Out-Of-Scope Assets, we found that Binance was 101% collateralized.”
Binance released the proof of reserve system after the FTX crash in order to offer users more confidence and trust in its systems. Despite this effort, the lack of comprehensive information from Binance has been criticised as a fruitless endeavour. In response to the system, Jesse Powell, CEO of crypto exchange Kraken tweeted:
I’m sorry but no. This is not PoR. This is either ignorance or intentional misrepresentation.
The merkle tree is just hand wavey bullshit without an auditor to make sure you didn’t include accounts with negative balances. The statement of assets is pointless without liabilities. https://t.co/b5KSr2XKLB
— Jesse Powell (@jespow) November 25, 2022