The fall of FTX highlighted the importance of proof of reserves to deter risks and improve investor confidence, and encouraged the leading crypto exchanges to publicly list their cold and hot wallet addresses. When we tried to confirm the availability of funds on Crypto.com, cold storage information revealed a suspicious transfer of 320,000 Ether (ETH) to a wallet address linked to Gate.io on October 21, 2022.
Community member @jconorrogan raised concerns about the transfer of 320,000 ETH from Crypto.com’s cold wallet to Gate.io, as the former claims that 100% of user-owned cryptocurrencies are kept offline in cold storage in conjunction with the hardware -wallet provider Ledger.
As discussions mount, Kris Marszalek, the CEO of Crypto.com, revealed that the funds – which represent 82% of Crypto.com’s ETH stake in the cold store 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 was sent to a whitelisted external exchange address.”
However, Marszalek confirmed that Gate.io returned the funds to Crypto.com’s cold storage and assured the investors that new processes and features were implemented to prevent a repeat.
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 (@jconorrogan) November 12, 2022
While on-chain data confirms that Gate.io returned 285,000 ETH to Crypto.com, Marszalek said that all funds have been returned. Further investigation showed that the missing 35,000 ETH was sent to another address, which has yet to be confirmed by the crypto exchange.
This isn’t the first time Crypto.com has made headlines for an accidental transfer. Back in August 2022, Crypto.com was found to have accidentally sent AUD $10.5 million (worth more than $7 million) to Melbourne-based investors, which was supposed to be an AUD $100 ($67) refund. The incident occurred in May 2021, but was only discovered during an annual audit in December 2021.
Related: Crypto.com Commits to Proof of Reserves After FTX-Backed Solana Deposits and Withdrawals Halt
Marszalek promised to publish Crypto.com-audited proof of reserves on November 10 while stressing the importance of transparency and user safety.
We share the belief that it should be necessary for crypto platforms to publicly share proof of reserves and https://t.co/pFc4Pz9nFR will publish our audited proof of reserves.
— Chris | Crypto.com (@kris) November 10, 2022
With most crypto businesses willing to share their proof of reserves, investors now have the opportunity to confirm the existence of their funds, ultimately preventing business owners from abusing the cold storage funds.