‘Big Short’ Michael Burry Says Crypto Audits Are Useless

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Famous investor Michael Burry, who predicted the mortgage crisis in 2007, breaks the now famous crypto audits, known as proof of reserves.

In a recent tweet, Burry draws a parallel between credit swaps and cryptocurrencies. He notes that accounting firms are still learning about crypto, which is not a good thing.

This is the problem. In 2005, when I started using a new type of CDS, our listeners were learning on the job. It is not a good thing. The same goes for FTX, Binance, etc. The audit basically makes no sense. pic.twitter.com/mA3MMvaUTu

— Cassandra BC (@michaeljburry) December 16, 2022

The investor cites a Bloomberg report stating that Mazars, the organization that audited Binance, Crypto.com and KuCoin, has stopped offering cryptocurrency-related services. Burry claimed that all of these audits were useless.

Three things make Michael Burry famous: his financial success during the 2008 housing boom, the movie “Big Short” that detailed that period, and his hasty deletion from tweets.

This tweet about the current bitcoin brokerage audit issue was sent on December 16th. Some noticed that Burry stopped deleting his tweets once Elon Musk took over the social media platform.

Doubts about crypto audits

Shifting resources in such audits to get a picture is one of the critical flaws. To fill a hole in its books, a brokerage firm may borrow or steal funds from another subsidiary and pay them back later.

The best-known incident involves Tether and the Bitfinex exchange, which are connected to iFinex. Tether, at the time, borrowed $850 million to bail out sister company Bitfinex from financial difficulties.

Showing negative balances in accounts has been blamed for criticism of Binance’s audit, which has sparked a lot of speculation. Essentially, Binance can be owed 1,000 BTC by an investor, and the exchange would subtract that sum from the total.

With CoinFlex, this has been demonstrated. The brokerage became insolvent after several withdrawals, although an audit did not reveal this problem. After all, according to the broker, Roger Ver owes him $47 million.

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