Zhao Changpeng "will burn himself if he plays with fire"? Cryptocurrency storm scraped to Coinan

From the moment FTX fell, the storm seemed destined to hit Cryptocurrency, with which it has long been associated.

Recently, a Cryptocurrency user's account was officially blocked by Cryptocurrency because the user complained on Twitter that Cryptocurrency and Zhao Changpeng did not help him recover the funds stolen from his account, and that Cryptocurrency believed the user had "threatened" their customer service staff.

These users thought they were signing up for a third-party trading bot like 3Commas, but instead fell for a phishing scam in which their exchange API identities were stolen and used to steal funds from their accounts.

At the time, Zhao Changpeng asked users to delete their API keys to prevent further attacks from third-party platforms, but offered no further initiatives to compensate users.

According to the user, Cryptocurrency was not much help in recovering the lost funds. Cryptocurrency said the user "threatened" their support staff, resulting in the account being deactivated and the user having three days to file a withdrawal request.

Cryptocurrency's Twitter account said of the user.

You have intensified and refused to report the case to the police, instead you tried to accuse us and demand compensation. You have even issued threats, which we cannot tolerate.

Users then began to criticize Coinan as the incident meant that anyone who criticized them could have their accounts terminated.

One Twitter user shared a tweet in which he feared that Cryptocurrency was acting similarly to FTX - in danger of going bankrupt due to its inability to compensate victims.

The Mystery of Financial Reports
In an attempt to reassure investors, Cryptocurrency has taken a number of steps in the wake of the FTX bankruptcy to try to reassure customers about the safety of its assets, but it now appears that this may have backfired.

On Wednesday, Cryptocurrency released a "Cryptocurrency Reserve Report" from Mazars - which was actually just a five-page letter from a partner at the firm's South African office. The letter does not address the effectiveness of CoinAnnex's internal financial reporting controls, nor does it contain an opinion from Mazars.

Mazars says it uses "agreed procedures" required by Coinan to do its work, and "we make no representation as to the adequacy of those procedures.

But the brief "report" itself is also full of doubts.

On the last page of Mazars' letter, there is a section called "Report Details," which includes three numbers, each denominated in bitcoin. One of the numbers, labeled "Customer Liability Report Balance," shows a balance of 597,602 bitcoins. The other number, labeled "Asset Balance Report," showed a balance of 582,486 bitcoins.

The result is that the total bitcoin liability cited in Mazars' letter is 3% more than the bitcoin assets included in the report on the date of the report (i.e., November 22).

In other words, Cryptocurrency did not meet its 1:1 ratio of reserves to customer assets. According to media calculations, in U.S. dollars, based on the bitcoin price at the time, liabilities were about $9.68 billion, while assets were about $9.43 billion, or $245 million less.

The letter does not show Coinan's total assets or total liabilities, but only discloses its bitcoin assets and liabilities.

For its part, Coinan said Mazars' letter covers all of the bitcoin assets and bitcoin liabilities of the Coinan exchange - although Mazars' letter itself does not say so. Cryptocurrency also said that Mazars' letter does not yet cover any assets and liabilities of Cryptocurrency's U.S. operations, and that subsequent disclosures may continue.

Coinan referred to the figures as "audit results" in a Nov. 25 press release. Carmichael, the former chief auditor of the U.S. Public Company Accounting Oversight Board (PCAOB), said.

To call this an audit is a serious misnomer.

Originally from the same root
Users' concerns are not unreasonable. Also an exchange, Coin and FTX have too much similarity.

Three years ago, Zhao Changpeng and FTX CEO SBF were close allies, and CoinAnchor made a strategic investment in FTX, helping FTX's valuation soar from $100 million to $18 billion in just two years.

In July 2021, Zhao Changpeng announced that Cryptocurrency had completely withdrawn from its equity investment in FTX, officially announcing the breakup of the two companies.

On the surface, this stems from the conflicting layouts of their business ecologies, but the higher dimension comes from the differences in strategy and culture between the two.

After the breakup, Coin and FTX had been at peace with each other until November this year, when the report that ignited the FTX crisis was leaked.

On November 6, Zhao Changpeng announced that he would dump all FTTs on his books, and FTT prices quickly plummeted. Subsequently, he and SBF launched a takeover "tug-of-war", and the abandonment of the acquisition of FTX is to push it to the edge of the cliff - November 11, FTX filed for bankruptcy.

After "helping" to bring down FTX, Zhao also warned that the cryptocurrency community is facing a crisis similar to the one it faced in 2008.

The 2008 financial crisis and the events of this week may be an accurate analogy.

But now, the fire may have burned into the coin itself.