Michael Burry, the legendary investor who foresaw the subprime mortgage crisis, is wary of so-called proof of reserves that crypto exchanges have touted since FTX crashed.
The “Big Short” former hedge fund manager tweeted on Friday that such reviews on a firm’s digital holdings are “essentially meaningless.”
“In 2005 when I started using a new kind of credit default swap, our auditors were learning on the job,” Burry tweeted on Friday. “That’s not a good thing. Same goes for FTX, Binance, etc. The audit is essentially meaningless.”
The tweet came as a comment on news that Mazars, the French accounting firm used by Binance and other larger players in the space to produce proof-of-reserves reports, halted all work with crypto-related clients on Friday.
Binance in particular has touted proof of reserves as a way to assure customers that their assets are secure in an effort to boost transparency amid the FTX scandal.
But critics have said that proof of reserves doesn’t provide a complete picture of a company’s risks and can be misleading.
There’s been a thunderous cry for audits of major crypto firm’s following the collapse of FTX, the once $32 billion empire started by Sam Bankman-Fried.
FTX filed for bankruptcy last month after a Coindesk report revealed that FTX’s native token FTT was being used to prop up Bankman-Fried’s quant trading firm Alameda Research. The embattled firm lost $8 billion of customer money as a result.
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