Binance on Fire｜CNBC Host Rolls Eyes at CZ, Actuary YouTuber Questions Reserves

The well-known YouTuber CK, whose profession is an actuary specializing in managing financial risks and uncertainties that may lead to financial losses, has a channel C&K GO! with 150,000 subscribers. CK recently analyzed a segment of Binance founder Zhao Changpeng's interview on CNBC in a new video released on the 17th.

After FTX's bankruptcy, Binance's reserve assets have come under scrutiny. Binance founder Zhao Changpeng, also known as CZ, has been actively trying to prove that Binance does not have "solvency issues." However, Zhao Changpeng's previous interviews have now become the catalyst for the backlash against Binance.

The YouTuber's focus is on Binance's on-chain assets. She pointed out discrepancies in Binance's disclosed cryptocurrency assets in videos where the "Net Worth" of all assets is stated to be $61 billion. However, since Binance has not disclosed its liabilities, this figure may not be accurate.

CK: "In Binance's current disclosure of $61 billion in virtual currency assets, it shows that the net assets are also $61 billion, but this is actually not accurate because net assets are assets minus liabilities, and Binance has not yet disclosed its liabilities or had them audited."

CK stated that such results do not prove Binance's claim of having a 100% reserve.

This was also questioned by the CNBC host. In the interview, Zhao Changpeng repeatedly emphasized that Binance does not lend money to others and does not borrow money from other companies.

For CK, it is hard to believe that a company as large as Binance has no borrowing or financial turnover with other companies.

CNBC Host: Why Doesn't Binance Use the Big Four for Auditing?

YouTuber CK believes that since the bankruptcy of FTX, Binance's founder, Changpeng Zhao, has been actively proving Binance's asset reserves, and the quickest way to do so would be to hire one of the Big Four accounting firms for auditing.

Rebecca Quick, a host known for her connection to Warren Buffett, pointed out that if the Big Four refuse to audit Binance, it implies that there are issues with Binance itself. In response, Changpeng Zhao mentioned that most accounting firms are hesitant to audit cryptocurrency exchanges because they lack understanding of blockchain and cryptocurrencies.

However, another host immediately mentioned that Coinbase undergoes audits by the Big Four. CZ stumbled for a moment and simply stated that he hadn't been paying attention to Coinbase.

Additional note: In the video, it was mentioned that Changpeng Zhao wants to become the "Warren Buffett of the crypto world" after SBF, but this is a misunderstanding as he gained fame before SBF and his company is much larger than FTX.

Would Returning $2 Billion in Profits Affect Binance?

When FTX first started, Binance was one of the early investors. In 2021, FTX bought back Binance's shares, resulting in profits of approximately $2.1 billion.

The host then asked whether this $2.1 billion was in USD or other cryptocurrencies. Changpeng Zhao mentioned that some were in USD, stablecoin BUSD, but primarily in FTT. Therefore, even if the value of FTT has dropped significantly, Binance still holds FTT with a market value of $500 million.

Further questions from the host became more complex: What if profits need to be clawed back?

This involves whether it is based on USD valuation or the original cryptocurrency valuation. If it's based on USD, the clawed back amount could reach $2.1 billion, which might impact Binance's finances.

Changpeng Zhao did not provide a direct response, only mentioning that it would be handled by lawyers and that Binance's financial situation is sound. The Warren Buffett-affiliated host rolled her eyes in response.

Additional note: Clawback refers to the ability of a bankruptcy trustee to recover assets transferred fraudulently by the bankrupt party within one to ten years before filing for bankruptcy.

At the end of the video, YouTuber CK expressed doubt about Changpeng Zhao's responses. While she did not indicate problems with Binance's finances, the video title "‘CZ’ Accidentally Reveals He's Also a Scammer! Flawed Interview" seems to align with the host's perspective.

Full video:

Fairness: Company Finances vs. User Assets Are Separate Matters

Despite Changpeng Zhao's struggle with the host's questions, readers should understand that Binance's financial situation and user assets are distinct. Even if Binance's finances are in question, as long as they maintain "asset segregation" and do not misappropriate user assets, users' assets should not be affected.

Currently, Binance seems to aim to separate the two, hoping to conduct independent audits solely for user assets. This was also the case with previous audits by Mazars and the Proof of Reserves (PoR).

However, the host's skepticism is valid because merely disclosing assets does not guarantee that those assets are not earmarked for other liabilities.

Furthermore, Coinbase is a U.S. compliant exchange with significantly fewer cryptocurrencies supported compared to Binance, and it does not offer derivative trading such as contracts, futures, and options. Therefore, the complexity of Binance's situation is higher compared to Coinbase.

According to Nansen data, Binance's total assets are currently around $54.9 billion, with the majority in stablecoins BUSD and USDT, followed by BTC and ETH.