- Crypto.com accidentally sent 320,000 ETH to Gate.io last month
- Crypto.com didn’t inform its users at the time, only doing so once it had been rumbled
- The news led to calls over the weekend for customers to leave the exchange
Crypto.com accidentally sent 320,000 ETH to Gate.io last month and never said anything, according to its CEO Kris Marszalek. The error prompted calls for Crypto.com users to abandon the platform, with the fact that it could make such an error and then not inform its users taken as a sign that its calls for transparency were hypocritical. Marszalek was forced to acknowledge the error when someone spotted the moves on the blockchain.
80% of ETH Deposits Left the Platform
The proof of reserve movement sprung up following the collapse of FTX and was driven by Binance CEO Changpeng Zhao, whose company posted its own reserves last week, leading to other exchanges promising to do the same. However, Gate.io had been posting its own proof of reserves through audits for some years, and was preparing to do another on October 28, six days before the FTX snowball started rolling.
The massive ETH deposit by Crypto.com, 80% of all the ETH it owned, landed with Gate.io October 20, a day after data for the next proof of reserves report was sent to Gate.io’s auditor, Armanino. This meant that the figures weren’t included in the October report, and Gate.io sent the dollar value of the ETH back to Crypto.com on October 29.
Marszalek Rumbled
When the odd transfers were spotted on Twitter, there was an immediate call for clarity on the matter. Marszalek then tried and explain away the error:
It was supposed to be a move to a new cold storage address, but was sent to a whitelisted external exchange address. 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.
— Kris | Crypto.com (@kris) November 13, 2022
Marszalek’s response highlighted several problems – first, the fact that an exchange could accidentally send $400 million worth of its holdings, which customers rely on for their withdrawals, to the wrong address; second, that Marszalek didn’t announce the incident at the time, clearly hoping that no one would notice; and third that he was so blasé when he was finally rumbled.
The incident, and Marszalek’s handling of it, led many to assume, perhaps erroneously, that Crypto.com was insolvent and that everyone should get their funds off the platform. This may have been an illogical conclusion to jump to, but that didn’t matter to the fearful millions on crypto land.
Despite coming to the conclusion the wrong way, the end result is nevertheless accurate – any exchange that can accidentally send your funds to the wrong address and then only admit it when it has been caught, is not one to be trusted.
