Are Crypto Exchanges Faking Proof Of Reserves? CZ Warns Investors

Crypto Billionaire

In the light of FTX crash, Binance CEO CZs initiative to disclose proof of reserves has forced other market players to do the same. While, exchanges have started declaring their proof of funds, crypto leaders are raising allegations over large exchange inflows and outflows.

What’s Going On At And Huobi?

As reported by WuBlockchain 280,000 ETH worth nearly $400 million were transferred from a cold wallet to a address. The crypto twitter community soon reported a 285,000 ETH transfer back to cold wallet from Gate[.]io. These transfers took place before and released their proof of reserves snapshot.

FTX crisis

Source: Etherscan CEO responded to allegations and said that these transfers were accidental. He added it was a mistake and the ethereum coins were planned to be transferred to another cold storage. The ETH coins were by mistake transferred to a whitelisted address at Gate[.]io. He informed that transfer has been recovered back to cold storage wallets. CEO

Another exchange reportedly involved in huge transfers before or after proof of reserves is Huobi. One of the Huobi wallets labelled as Huobi 34 transferred 10,000 ETH just after the proof of reserve snapshot. At the time of snapshot the mentioned wallet had 14,858 ETH while now there are only 4,044 ETH remaining.

FTX crisis

Huobi has also come out with a statement citing the above transfer to an institutional investor. The team has reported that all reserves are now recovered and operating normally.

CZ Issues Warning For Investors, What’s Next?

Binance CEO CZ has released a warning for all crypto investors amid ongoing allegations of possible manipulation of reserves by exchanges. He informed investors that large movements of funds before or after release of proof of reserves by any exchange is a clear sign of problem.

CZ FTX crisis

As reported by CoinGape, FTX bankruptcy will impact many more crypto projects which were involved with FTX exchange and alameda research. Even Elon Musk has confirmed that he never believed Sam Bankman-Fried aka SBF had $3 billion that he was offering to Elon Musk for twitter acquisition.

SBF exchange and Alameda have invested in dozen of project that includes famous crypto projects like Aptos Labs, Near Protocol, paxos, Genesis digital assets etc. This makes it clear that FTX crisis is not over yet and many crypto firms are struggling to maintain their finances at the moment.

Are Proof Of Reserves Sufficient For Transparency? 

Major Indian crypto exchange CoinDCX founder Sumit Gupta argued that proof of reserve provides only one side of the part as it is justification of asset value at any given instant. But what about the liabilities that exchanges hold? In his opinion proof of reserves without proof of liabilities in incomplete.

He proposed a solution called R2L ratio or Reserves to liabilities ratio,

“So let’s take it one step ahead and ensure this with Reserves to Liabilities (R2L) Ratio. Total assets owned (on/off chain) / Total liability & contingencies”

He shared a screenshot of R2L ratio for CoinDCX’s top 10 assets and announced that his exchange will publish R2L ratio position of the exchange periodically.

R2L ratio- CoinCDX

The post Are Crypto Exchanges Faking Proof Of Reserves? CZ Warns Investors appeared first on CoinGape.


Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
On Key

Related Posts

Crypto Crisis Pushes BTC Mining Difficulty To Bottom Spot, Any Possibility Of Reversal?

The low profitability of BTC mining is still puzzling for many crypto fanatics and investors. There’s no surprise here, given the ever-increasing energy costs. Moreover, the bear market is also significantly impacting Bitcoin’s mining difficulty. As for now, making reasonable profits from mining Bitcoin is not probable. This fact, however, doesn’t imply that BTC mining

Bitcoin (BTC) Price Dump Incoming? On-Chain Data Reveals Bottom

Bitcoin (BTC) price failed to hold above $17k and fell to the support near $16,500 again. The BTC price remains under pressure as miner capitulation risk continues to haunt traders looking to make long positions. On-chain data reveals miners are indeed liquidating their Bitcoin holdings due to financial constraints. The effect can be easily seen