How safe is Crypto.com?

Crypto.com recently recovered $400 million in $ETH after it mistakenly sent it to crypto exchange Gate.io, instead of its own cold storage wallet.

With the public spotlight very much focused on centralised crypto exchanges, it might seem extremely unfortunate that Crypto.com could make such an awful blunder as to send 320,000 Ether (80% of its entire Ether holdings) to a whitelisted external exchange address, instead of its own cold wallet storage where it was meant to go.

This is not the first time that Crypto.com has made such an error. Last year it mistakenly sent the equivalent of $7 million to an Australian woman living in Melbourne, when an employee entered the account number into the payment field by accident.

Given that the Sam Bankman-Fried FTX/Alameda Research debacle is still very fresh in the mind, and the extent of alleged fraudulent goings-on are still unfolding, the last thing needed is for yet another centralised exchange to come under the gaze of the public eye.

Crypto.com is currently going through the process of preparing for a Proof-of-Reserves audit, and has started to publicly share its wallet addresses. CEO Kris Marszalek tweeted on Friday that the audit will be complete in the next couple of weeks, proving that customer assets are backed 1:1.

CZ, CEO of rival exchange Binance, was critical of Crypto.com when he tweeted that if an exchange had to move large amounts of crypto at the same time that they were showing their wallet addresses then this was a sign that there may be issues.

If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away. Stay #SAFU. 🙏

— CZ 🔶 Binance (@cz_binance) November 13, 2022

On top of this, some respondents to the Marszalek Proof-of-Reserves audit tweet have expressed some alarm at the fact that the meme token $SHIB is the second biggest holding for Crypto.com, at nearly 20% of its entire portfolio.

That's a lot of $SHIB pic.twitter.com/YZIfj7MBDD

— CryptoAmsterdam (@damskotrades) November 11, 2022

Marszalek stated in a tweet that the erroneous $400 million transfer happened more than 3 weeks ago, and that it has since “strengthened” its systems in order to “better manage these internal transfers”. However, this might not completely assuage the fears of customers and potential investors.

On the price chart things do look rather precarious for Crypto.com. The $CRO token has fallen nearly 50% over the past week, going from around 12.5 cents to 6.5 cents. 

Should the run on Crypto.com continue, things could become rather tricky for the exchange. The crypto sector will be fervently hoping that Crypto.com doesn’t become the next domino to fall and thereby further exacerbate the contagion caused by FTX and others.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.