Hedge fund manager Michael Burry, famed for forecasting the 2008 financial crisis, says the problem with auditing cryptocurrency exchanges, like Binance and FTX, is the same as when he started using a new kind of credit default swap. “Our auditors were learning on the job,” he described, adding that it’s “not a good thing.”

Michael Burry on Audits of Crypto Firms

Famous investor and founder of investment firm Scion Asset Management, Michael Burry, said Friday that proof-of-reserves (POR) audits of cryptocurrency exchanges, including Binance and the collapsed exchange FTX, are meaningless.

Burry is best known for being the first investor to foresee and profit from the U.S. subprime mortgage crisis that occurred between 2007 and 2010. He is profiled in “The Big Short,” a book by Michael Lewis about the mortgage crisis, which was made into a movie starring Christian Bale.

Commenting on accounting firm Mazars Group halting proof-of-reserves audits for crypto companies, Burry tweeted:

This is the problem. In 2005 when I started using a new kind of credit default swap, our auditors were learning on the job. That’s not a good thing. Same goes for FTX, Binance, etc. The audit is essentially meaningless.

Burry’s tweet references an article by Bloomberg explaining that the French accounting firm suspended work on crypto firms because of concerns over intense media scrutiny and indications that markets have not been reassured by the proof-of-reserves reports it has published so far, including for Binance, Crypto.com, and Kucoin.

The news followed criticism from the CEO of rival crypto exchange Kraken, Jesse Powell, who recently denounced Binance’s POR audited by Mazars. This week, more than $3 billion in funds were withdrawn from Binance.

Addressing concerns over his exchange’s POR in an interview with CNBC Thursday, Binance CEO Changpeng Zhao (CZ) also claimed most accounting firms do not know how to audit cryptocurrency exchanges.

The executive was asked why Binance does not use one of the Big Four accounting firms — Deloitte, EY, KPMG, and Pricewaterhousecoopers (PwC) — to audit its books, and whether the crypto firm was unable to provide files and data for auditors to be comfortable giving their stamp of approval. The Binance boss simply replied:

Many of them don’t even know how to audit crypto exchanges.