Crypto.com CEO says $347million ETH transfer a ‘mistake' as exchange's CRO token drops nearly 50% in a week
(Kitco News) - Crypto.com CEO Kris Marszalek was scrambling to reassure customers and crypto markets on Monday after a massive $347 million of the company’s stake in Ether was spotted moving back and forth on-chain.
According to Etherscan data, about 285,000 ETH was sent from Crypto.com’s wallet address to Gate.io, another crypto exchange, before being sent back.
Marszalek claimed the transfer from Crypto.com to Gate.io was made in error, and the intention was to send the ETH to a cold storage wallet.
“It was supposed to be a move to a new cold storage address, but was sent to a whitelisted external exchange address,” he wrote. “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.”
The massive ETH stockpile was sent back to Crypto.com just days before it shared its reserves with worried market participants after the collapse of FTX.
When Marszalek announced Crypto.com’s reserves late last week, he highlighted the exchange’s large holdings of bitcoin and Ether. “While the proof of reserves audit preparation is underway, we are sharing our cold wallet addresses for some of the top assets on our platform,” he wrote in a tweet. “This represents only a portion of our reserves: about 53,024 BTC, 391,564 ETH, and combined with other assets for a total of $3 billion.”
At the time, he told customers they could expect Crypto.com “to continue working in spirit of full transparency and remain the steady hand and a safe, secure platform.” The community was not impressed when it emerged that over 80% of the company’s ETH reserves were moved not long before the balance sheet snapshot was captured.
Marszalek also held a live AMA on Monday morning, where he fielded questions about his platform’s liquidity and solvency, including the Ether move.
When asked how the breakdown could have occurred to enable such a huge transaction, Marszalek said that “every single address that our systems allow funds to be sent to, is whitelisted and pre-approved,” and that there is “no way” funds could end up at an address where they couldn’t be recovered. He also said the transfer with Gate.io “had nothing to do with Gate doing the proof-of-reserves,” or “any of the craziness that’s been happening since FTX collapsed.”
Referring to some market participants making parallels to FTX and wondering if Crypto.com used their Cronos (CRO) token as collateral for loans, Marszalek was emphatic. “We never used CRO as collateral for even a single loan in our history, not even once,” he said. “We haven’t needed to use it.”
Unfortunately for Marszalek, Binance CEO Changpeng Zhao also held an AMA on Monday where he said that while many small exchanges rely on either each other or on Binance for liquidity, he does not. “Binance, because we're the largest liquidity pool on the planet, we don't use other smaller exchanges for liquidity,” he said. “All of the user funds, all of our funds stay on our platform.”
CZ also posted a tweet on Sunday that could be interpreted as a critique of Crypto.com’s apparent balance-sheet shenanigans, writing that “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. Stay away.”
With the disappearance of FTX, Crypto.com is now the 17th largest cryptocurrency exchange by volume, with $577 million in transactions per day and over 913,000 weekly visits, according to CoinMarketCap. Binance, by comparison, holds the number-one position with nearly $20 billion in daily volume and over 15 million weekly visits.
Crypto.com’s CRO utility token has lost over 45% of its value in the last seven days and over 93% since its all-time high of $0.891 a year ago. At the time of writing, CRO was trading at $0.069, down from an intraday high of $0.127 registered on November 7.