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After the collapse of FTX, other centralised crypto exchanges are under scrutiny, and Crypto.com clients are anxious after CEO Kris Marszalek admitted that the platform mistakenly transferred 320,000 ETH, worth around $400 million, to a public address at a rival exchange.
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On October 21st, over 80% of Crypto.com’s ETH reserves were moved to rival exchange Gate.io only days before Gate.io offered “proof of reserves” to its users as part of a new drive for transparency.
On October 29th, Gate.io refunded around $456 million worth of 285,000 ETH due to a modest ETH price increase. On November 12th, Crypto.com produced its proof of reserves.
“It was supposed to be a move to a new cold storage address, but was sent to a whitelisted external exchange address,” tweeted Marszalek on Saturday. “We worked with [the] Gate team, and the funds were subsequently returned to our cold storage. New processes and features were implemented to prevent this from reoccurring.”
It was supposed to be a move to a new cold storage address, but was sent to a whitelisted external exchange address. We worked with Gate team and the funds were subsequently returned to our cold storage. New process and features were implemented to prevent this from reoccurring.
— Kris | Crypto.com (@kris) November 13, 2022
Marszalek noted that all the funds have been refunded and that Crypto.com’s balance on Gate is in the single-digit millions of dollars.
According to statistics from CoinGecko, Cronos, Crypto.com’s native coin, is already down more than 50% for the week.
In a post decrying the resultant rumours as “FUD,” Marszalek provided a snapshot of Gate’s reserves on October 19th without the Crypto.com funds, showing the supposition was unfounded. Gate also clarified their help to Crypto.com to restore 320k ETH mistakenly sent.
The ETH transfers that generated so much FUD & speculation on Twitter today were made over three weeks ago, on October 21st to https://t.co/pFc4Pz9nFR’s whitelisted corporate account at https://t.co/Mr9GCkL2gV.
— Kris | Crypto.com (@kris) November 13, 2022
Crypto.com and Gate.io did not react immediately to Decrypt’s requests for comment.
The transaction occurred days after one of the top five exchanges in the world suffered a devastating bank run and lacked the liquidity to cover, causing Sam Bankman-empire Fried’s reputation to collapse completely.
Similar to FTX, Crypto.com promotes itself as a regulated, trustworthy crypto firm, statements that are now contested by many.
Binance CEO Changpeng Zhao, who initiated the FTX selloff a week ago by tweeting that his business would liquidate its FTX token holdings, pounced swiftly on the Crypto.com debacle.
“If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems,” he tweeted. “Stay away.”
The publishing of Crypto.com’s proof of reserves on November 12th had already sparked confusion. 20% of the exchange’s holdings were denominated in SHIB, a joke crypto based on another joke crypto, DOGE.
FTX spent hundreds of millions of dollars on sports sponsorship arrangements which are rapidly disintegrating due to its bankruptcy; the Miami Heat said it would remove the FTX moniker and seek a new stadium naming partner. The $700 million stadium naming rights contract with the Los Angeles Lakers eclipses the FTX/Heat deal, and Crypto.com sponsors the 2022 FIFA World Cup in Qatar.