Crypto.com, one of the biggest crypto exchanges in the market, appears to have “accidentally” sent $400 million worth of ETH to Gate.io.
The aftermath of FTX’s collapse has created a lot of FUD in the market. Many crypto enthusiasts are no longer supporting centralized crypto exchanges given the recent scandals that have happened recently.
Because of these recent events, the crypto community urged many exchanges to commit to proof-of-reserves. A proof-of-reserves protocol is a way of publicly sharing an exchange’s liquidity to see if it has solvency, something which Sam Bankman-Fried’s FTX did not have.
Either way, Etherscan data shows that on October 21, Crypto.com transferred 80% of its ETH reserves, around 320,000 ETH, worth $400 million to Gate.io. Immediately after, Gate.io shared publicly its proof-of-reserves to show its users that the exchange has solvency. Shortly after, Gate.io transferred ETH back to Crypto.com. However, it’s worth noting that the amount returned was 285,000 ETH or $485 million, given that the price of ETH had increased during those days. A few weeks after, after the FTX controversy, Crypto.com also showed its proof-of-reserves publicly.
Clearly, this activity stinks of unethical means of being transparent to the public. In light of these events, CEO of Crypto.com Kris Marszalek was quick to acknowledge the transfers that happened between the two. He stated that the ETH was supposed to be transferred to a cold storage address. However, they “accidentally” sent it to another external address instead.
What Next for Crypto.com & Gate.io?
The crypto community is not buying the arguments of Crypto.com representatives, and understandably so. People are no longer trusting centralized exchanges, and one might argue that it’s only right that they don’t.
If exchanges are allowed to transfer users’ funds as they please to provide fake snapshots of their financial situations, who knows what else they’re capable of doing with users’ money?
While Marszalek stated that the transfer happened weeks before the FTX controversy, its proof-of-reserves released on November 12 show that 20% of Crypto.com’s token holdings consisted of Shiba Inu (SHIB). SHIB is by many considered as only a meme token. Hence, a crypto exchange with the magnitude of Crypto.com relying on unserious projects for liquidity further showcases why the crypto community has the right to be furious.
Cronos (CRO), Crypto.com’s native token, has been declining given these recent events. It has declined by more than 50% in the last few days, slowly following the path of the FTT token.
It’s also interesting to see that both Crypto.com and FTX had endorsements with major sports teams in NBA. FTX had naming rights to the Miami Heat stadium, but the latter revoked the partnership given recent outcomes. Crypto.com, on the other hand, has naming rights for Los Angeles Lakers stadium.
Gate.io, on the other hand, is also under pressure at the moment. It remains to be seen whether users may force withdrawals in the coming days. Gate.io presumably has evidence, however, to support that the Proof-of-Reserves in October did not include the ETH sent by Crypto.com. Nevertheless, keep in mind that Sam Bankman-Fried also claimed that FTX has liquidity 24 hours before he filed for bankruptcy.
These recent events have aggravated the lives of many crypto investors. Though the silver lining remains that these bad actors are finally filtered out of the market and hopefully never return.