Following FTX’s catastrophic crash, other centralized cryptocurrency exchanges have come under scrutiny, and users of Crypto.com are especially worried. According to Kris Marszalek, the Crypto.com CEO, the platform accidentally transferred 320,000 ETH (nearly $400 million) to a rival exchange’s public address.
According to Etherscan data, on October 21, around 80% of Crypto.com’s total ETH holdings were transferred to its competitor Gate.io — shortly before Gate.io provided users with “proof of reserves” on October 28, in an effort to demonstrate transparency.
Afterward, on October 29, Gate.io issued back a slightly decreased amount of 285,000 ETH, about $456 million, following a short-lived surge in the value of Ethereum. Then, Crypto.com published its own proof of reserves on November 12.
In a tweet on Saturday, Marszalek stated that the company meant to relocate the funds to a separate cold storage address but instead transferred them to a whitelisted exchange address. “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.”
According to Marszalek, all the tokens are back, and Crypto.com currently has a single-digit-million-dollar balance on Gate.
CoinGecko data show that Cronos, the native token of Crypto.com, dropped more than 50% last week.
While slamming the claims that followed as “FUD,” Marszalek provided an overview of Gate.io’s reserves from October 19, where no Crypto.com funds were present. The company also published a blog post late Saturday night with details about the help it provided to Crypto.com to retrieve 320k ETH that had been transferred by mistake.
This bizarre transaction occurred just days after a massive bank run hit one of the world’s top five exchanges, which lacked the liquidity to cover the losses, which resulted in destroying Bankman-Fried’s reputation and brand.
In the same way as FTX, Crypto.com advertises itself as a regulated, credible crypto exchange — a claim that is now being questioned by many.
The CEO of Binance, Changpeng Zhao, who, in a tweet the week earlier, triggered the FTX selloff by saying he would liquidate his company’s stash of FTX tokens, reacted immediately to the Crypto.com debacle.
“If an exchange has to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems,” he wrote.
The proof of reserves released by Crypto.com on November 12 had already caused some confusion. It was revealed that around 20% of the holdings of the exchange were SHIB, a meme token based on another meme coin, DOGE.
Sports sponsorship deals that FTX spent millions on are rapidly dissolving following its bankruptcy; Miami Heat has decided to drop the FTX name and look for new naming partners. Crypto.com has invested heavily in sports, too: the exchange has signed a $700 million arena sponsorship deal with the Los Angeles Lakers that is far larger than FTX’s deal with the Heat. Additionally, Crypto.com has partnered up with FIFA to sponsor the World Cup 2022 tournament in Qatar.