Binance Records Over $3 Billion in Outflows as Its Proof of Reserves Fails to Calm Investors

Binance, the leading cryptocurrency exchange, has seen over $3 billion in outflows in the last 24 hours, as investors remove their assets amid worries that the platform may be unable to fulfill withdrawals in the event of a bank run.

According to Nansen statistics, the exchange saw its greatest daily withdrawals since June, exceeding $3 billion, $2 billion of which were in the form of Ethereum-based tokens.

The withdrawals came after Binance was chastised for only displaying “part” of its assets and liabilities in a proof-of-reserves and proof-of-liabilities verification report issued last week by Mazars’ South African subsidiary.

“I can’t believe that solves all the issues an investor would have about the adequacy of collateralization,” said Douglas Carmichael, an accounting professor at Baruch College and former top auditor of the U.S. Public Company Accounting Oversight Board.

Jesse Powell, CEO of Kraken, also disputed the report, claiming it included “interchangeable” assets, negative balances, and grouping by “class.”

Former SEC enforcement head John Reed Stark chimed in as well, stating the study “doesn’t examine the efficacy of internal financial controls, doesn’t offer an opinion or assurance conclusion, and doesn’t vouch for the data.” I spent almost 18 years in SEC Enforcement. This is how I define the term “red flag.” The report’s tiny print specifies that it is not an audit.

Users are withdrawing cash from Binance due to these fears, since some were able to withdraw monies prior to the collapse of FTX before the exchange froze withdrawals. Many people are increasingly preferring to custody their own finances in order to prevent losing money put in centralized third-party accounts that fail.

Notably, according to Nansen statistics, Binance still has over $52 billion in digital assets in its wallets, with over 50% in BUSD, USDT, and BTC.