The CEO of Crypto.com confirmed the refund and assured investors that new processes and features have been implemented to prevent a recurrence.
The drop in FTX highlighted the importance of proofing reserves to prevent risk and boost investor confidence, urging leading crypto exchanges to publicly release their cold and hot wallet addresses. When attempting to verify funds on Crypto.com, cold storage information revealed a suspicious transfer of 320,000 Ether.
to the wallet address associated with Gate.io on October 21, 2022
On-chain data confirms the transfer of 320,000 ETH from Crypto.com to Gate.io. Source: Eterscan
Community member jconorgrogan raised concerns about moving 320,000 ETH from Crypto.com’s cold wallet to Gate.io given previous claims that 100% of cryptocurrencies owned by users are stored offline in cold storage in collaboration with hardware wallet provider Ledger .
As discussions escalated, Chris Marsalek, CEO of Crypto.com, revealed that funds representing 82% of Crypto.com’s ETH held in cold storage at the time of writing were accidentally sent to Gate.io:
“This was supposed to be a move to a new cold storage address, but it was sent to a whitelisted external exchange address.”
Speaking to Cointelegraph, a representative from Crypto.com clarified that the address whitelisted by Gate.io belongs to Crypto.com. Despite this, Marszalek confirmed that Gate.io returned the funds to Crypto.com cold storage and assured investors that new processes and features have been implemented to prevent a recurrence.
While on-chain data confirms that Gate.io returned 285,000 ETH to Crypto.com, Marszalek stated that all funds were returned. Further investigation showed that the missing 35,000 ETH was sent to another address that has not yet been confirmed by the crypto exchange.
Later in a series of tweets, Marszalek explained what happened, confirming that all Crypto.com operations are working fine.
This is not the first time Crypto.com has made headlines due to an accidental translation. Back in August 2022, it was discovered that Crypto.com had accidentally sent AU$10.5M (worth over $7M) to Melbourne investors as a AU$100 ($67) refund. The incident happened as early as May 2021 but was not discovered until the annual review in December 2021.
Related: Crypto.com Commits to Confirming Reserves Upon Completion of Solana FTX-Backed Deposits and Withdrawals
Marszalek promised to release a verified confirmation of Crypto.com reserves on Nov. 10, emphasizing the importance of transparency and user security.
With most crypto companies willing to share their proof of reserves, investors now have the ability to prove the existence of their funds, ultimately preventing business owners from misusing cold storage funds.