After the shocking downfall of crypto exchange FTX, other centralized crypto exchanges have found themselves under the microscope and this applies to Crypto.com as well.
Customers of the exchange became quite concerned after Kris Marszalek, the CEO, acknowledged that they had accidentally sent about 320,000 ETH tokens to a public address that was registered at a rival exchange.
At the time of the transaction, the tokens were valued at $400 million.
Etherscan’s blockchain records show that Crypto.com transferred about 80% of its total ETH reserves on October 21st to an address on competitor exchange Gate.io.
This was just before October 28th when Gate.io had provided its users with ‘proof-of-reserves’, as part of the new trend of transparency after the collapse of the FTX exchange.
Subsequently, Gate.io returned the funds on October 29th, although they were slightly reduced to 285,000, but were valued at $456 million because the price of ETH had risen.
On November 12th, Crypto.com itself disclosed its own proof-of-reserves for reassuring its customers. On Saturday, the CEO had tweeted about the accidental transaction.
He stated that they were moving the funds to a new cold storage address, but had accidentally sent it to an external exchange address.
Marszalek said that they had cooperated with the Gate team and they subsequently returned the funds to their cold storage.
He also added that they had established new processes and introduced new features to ensure it does not happen again.
The CEO also added that since then, all of the funds have been returned and the exchange’s balance on Gate.io is once more in the millions in the single-digit.
Data from CoinGecko shows that the native token of Crypto.com called Cronos has now lost 50% of its value in the week.
Marszalek slammed the speculation that resulted as ‘FUD’ and also shared a picture of Gate.io’s reserves on October 19th, without the funds from Crypto.com.
Late on Saturday night, Gate also published a blogpost and clarified that the 320k ETH transfer had been a mistake that had been rectified.
The baffling transaction occurred just a day after one of the leading crypto exchanges in the world filed for Chapter 11 bankruptcy protection.
The entire empire of Sam Bankman-Fried unraveled because of a liquidity crisis, as did the crypto entrepreneur’s reputation, prompting him to resign as CEO of the exchange.
Similar to FTX, Crypto.com is also presented as a trustworthy, regulated crypto business, but many have now begun to doubt these claims.
Changpeng Zhao, the Binance CEO, quickly pounced on the fiasco of Crypto.com. A week ago, it was CZ who had triggered the FTX exchange after announcing that they were going to liquidate their FTT token stash.
Speaking of Crypto.com, he said that if a crypto exchange has to move a large amount of its funds before or after showing proof of reserves, then it is a sign of problems and people should stay away.
The proof-of-reserves of Crypto.com show that 20% of its holdings are denominated in SHIB, a meme token based on another meme token called DOGE.