The failure of FTX brought to light the significance of proof of reserves in mitigating risks and boosting investors’ trust. As a result, prominent cryptocurrency exchanges are being urged to publicly lay down the addresses of both their hot and cold wallets. When checking to see if there was money on Crypto.com, information from the cold storage facility showed that on October 21, 2022, 320,000 ether (ETH) tickers worth $1,180 were sent to a wallet address associated with Gate.io.
Concerns were raised by a community member named jconorgrogan regarding the transfer of 320,000 ETH from Crypto.com’s cold wallet to Gate.io. This is because Crypto.com asserts that 100% of user-owned cryptocurrencies are held offline in cold storage in partnership with the provider of hardware wallets known as Ledger. Gate.io was the recipient of this transfer.
As the conversation grew, Kris Marszalek, the CEO of Crypto.com, said that the assets, which at the time this article was written made up 82% of Crypto.com’s ETH in cold storage, had been sent to Gate.io by mistake.
A spokesman for Crypto.com said unequivocally that their company owns the whitelisted address that can be seen on Gate.io. Regardless, Marszalek verified that Gate.io had sent the funds back to Crypto.com’s cold storage. He also told the investors that new rules and features had been put in place to make it less likely that something like what happened would happen again.
It is not the first time that Crypto.com has been in the news due to an inadvertent transfer of funds. Back in August of 2022, it was discovered that Crypto.com made a mistake and handed investors in Melbourne AUD $10.5 million (worth over $7 million), instead of the AUD $100 ($67) return that was intended. The event took place in May of 2021; however, it was not found until a year later, in December of 2021, during an annual audit.
Investors now have the chance to prove the existence of their assets, which ultimately prohibits company owners from abusing the cold storage funds. This is possible because most companies that deal in cryptocurrencies are willing to show proof of reserves.
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