Michael Burry Explains (Indirectly) Why You Need to Get Your Cryptocurrencies off the Exchange…
Auditors don’t know how to audit exchange platforms and give you the guarantees you deserve. It is up to you to take control.
Do you know Michael Burry?
I’m sure you do if you are interested in the world of investment. If you are a fan of good books or movies, you probably discovered his story in “The Big Short: Inside the Doomsday Machine,” a best-seller by Michael Lewis that was later adapted into a successful Hollywood movie.
In this case, when I say Michael Burry, you must think directly of the face of Christian Bale who played his role in the movie “The Big Short.”
Michael Burry is a well-known investor and hedge fund manager. He became known for his role in the run-up to the subprime crisis.
Since then, Michael Burry’s opinions are still very much listened to and followed. He is not right every time, but the fact that he saw the subprime crisis coming seems to give him credit “ad vitam aeternam” for many investors.
Indeed, Michael Burry was the first investor to foresee and profit from the 2008 crisis. It was the subprime mortgage crisis in the United States. Which occurred between 2007 and 2010.
Typically, Michael Burry posts tweets to give his opinion on current topics in the world of investing, finance, and even cryptocurrencies from time to time. Once his tweet has generated enough buzz, after a few hours, Michael Burry has a habit of deleting it.
Fortunately, a Twitter account called @BurryArchive takes care of archiving every single one of his tweets, so we can fully enjoy his opinions.
Michael Burry’s latest opinion concerns audits of cryptocurrency exchange platforms such as Binance and FTX. Michael Burry bluntly explains that audits regarding these platforms are “meaningless.”
For once, Michael Burry hasn’t written it off yet:
“In 2005 when I started using a new kind of credit default swap, our auditors were learning on the job. That’s not a good thing. Same goes for FTX, Binance, etc. The audit is essentially meaningless.”
The tweet comes after accounting firm Mazars Group halted its audit of Binance’s proof of reserves and other trading platforms. Burry’s tweet refers to a Bloomberg article:
This Bloomberg article explains that the accounting firm Mazars Group has suspended its work on cryptocurrency companies. The reason stems from concerns over intense media scrutiny and indications that markets have not been reassured by the proof of reserves reports released so far, including for Binance, Crypto.com, and Kucoin.
This news follows criticism from the founder of rival exchange platform Kraken, Jesse Powell. Indeed, Jesse Powell recently denounced the proof of reserves of Binance audited by Mazars. Last week, more than $3 billion of funds were withdrawn from Binance.
Changpeng Zhao, the CEO of Binance, was asked why Binance does not use one of the Big Four accounting firms. These firms include the big four, Deloitte, EY, KPMG, and PricewaterhouseCoopers (PwC). This would be useful in terms of auditing. Therefore, some consider that the cryptocurrency company was not in a position to provide files and data for the auditors to give their approval.
CZ’s response confirms what Michael Burry said in his tweet: he considers that most accounting firms do not know how to audit cryptocurrency trading platforms.
So, this mismatch between these new tools that are cryptocurrency trading platforms and what audit firms currently master makes all audits meaningless to use Michael Burry’s terms. It will be some time before these auditing firms can increase their skills in these new subjects and produce audits that are truly satisfactory and reassuring for users.
In the meantime, there’s only one thing to do: get your coins out of the trading platforms. There is no safer way to keep the fruits of your labor than to have the private keys of your coins in your possession. You are the person you can trust the most. That’s what the slogan “Not your Keys, Not your Bitcoin” is all about.