Coppola Comment

Proof of reserves is all the rage on crypto platforms. The idea is that if the platform can prove to its customers' satisfaction that their deposits are fully matched by equivalent assets on the platform, their deposits are safe. And if the mechanism they use to prove this uses crypto technology, that's even better.  Crypto tech solutions have surely got to be much more reliable than traditional financial accounts and audits - after all, FTX passed a U.S. GAAP audit .  No, they aren't. Proof of reserves as done by exchanges like Binance does not prove that customer deposits are safe. It is smoke and mirrors to fool prospective punters into relinquishing their money, just like claims that exchanges and platforms are "audited" or have "insurance". There are no audits in the crypto world, there is no insurance, and as I shall explain, proof of reserves proves absolutely nothing. The biggest crypto exchange, Binance, uses a Merkle tree proof of reserves. H...

Those excellent researchers at the House of Commons Library have produced a briefing paper on the Carillion collapse. It is clear, succinct and well-researched. And extremely grim. The researchers seem to have gone back through the reports & accounts to about 2009. And they conclude that Carillion was a basket case not just in the last year of its life, but from about 2011 onwards. I've now done the same exercise, and I agree with them. Carillion's cupboards were virtually bare, and the little that was in them stank. This chart summarises the mess that Carillion got itself into: We need to be a little careful with this chart, of course, since it is comparing stocks and flows. But what it shows is that a large uplift in loans in 2010-12 generated absolutely no additional net cash revenue - in fact cash revenue actually fell between 2009 and 2016. For a company whose entire business model relies on increasing net cash flow, this is disastrous. The distressed upt...