The fall of FTX highlighted the importance of reserve tests to avoid risks and improve investor confidenceurging major cryptocurrency exchanges to publicly display their online and offline wallet addresses. Trying to confirm the availability of funds on Crypto.com, offline wallet information revealed a suspicious transfer of 320,000 Ether (ETH) to a Gate.io-linked wallet address on October 21, 2022..
Community member jconorgrogan raised concerns about the transfer of 320,000 ETH from Crypto.com’s offline wallet to Gate.io, noting that the first claims that 100% of cryptocurrencies owned by users are kept offline in “cold storage” or offline in partnership with hardware wallet provider Ledger.
As the discussions gathered steam, Kris Marszalek, the CEO of Crypto.com, revealed that the funds —representing 82% of Crypto.com’s ETH holding in offline storage at the time of writing— were accidentally sent to Gate.io:
“It was supposed to be a move to a new offline storage address, but it was sent to a whitelisted external exchange address.”
Speaking to Cointelegraph, the Crypto.com spokesperson clarified that Gate.io whitelisted address was owned by Crypto.com. Despite this, Marszalek confirmed that Gate.io returned the funds to Crypto.com’s offline storage and assured investors that new processes and features were put in place to prevent a repeat of the situation..
And why https://t.co/bVgf3bBSGR would send back to https://t.co/2vZHyCacXG 285K ETH 5-7 days later? pic.twitter.com/GhH6QGXntd
— Conor (@jconorgrogan) November 12, 2022
And why would he return 285,000 ETH 5-7 days later?
Although on-chain data confirms that Gate.io returned 285,000 ETH to Crypto.com, Marszalek claimed that all funds were returned. Subsequent investigation showed that the missing 35,000 ETH was sent to a different address, which has yet to be confirmed by the cryptocurrency exchange.
In a series of tweets, Marszalek later explained what happened while confirming that all Crypto.com operations were running as normal.
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
The ETH transfers that generated both FUD and speculation on Twitter today were made over three weeks ago, on Oct. 21 to the whitelisted corporate account.
It is not the first time that Crypto.com is in the news for an accidental transfer. Back in August 2022, it was discovered that Crypto.com accidentally sent 10.5 million Australian dollars (worth over 7 million US dollars) to Melbourne-based investors, which was supposed to be a refund of 100 Australian dollars. ($67). The incident occurred in May 2021 but was not discovered until an annual audit in December 2021.
Marszalek promised to publish Crypto.com’s audited proof of reserves on Nov. 10while stressing the importance of transparency and user security.
We share the belief that it should be necessary for crypto platforms to publicly share proof of reserves and https://t.co/pFc4Pz9nFR will be publishing our audited proof of reserves.
— Kris | Crypto.com (@kris) November 10, 2022
We share the belief that cryptocurrency platforms should be required to publicly share proof of reserves and our audited proof of reserves will be published.
With most cryptocurrency companies willing to share their proof of reserves, investors now have the opportunity to confirm the existence of their funds.ultimately preventing business owners from misusing offline storage funds.
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