Exchanging cryptocurrencies In late October, 320,000 ETH were unintentionally transmitted by Crypto.com to a wallet address connected to Gate.io. Although the company has now recovered the funds, Changpeng Zhao, the CEO of Binance, recommended customers to stay away from it.
Many in the cryptocurrency industry have expressed concern about the dependability of centralized players in the wake of the unprecedented collapse of FTX, which was once the third-largest cryptocurrency exchange and built a reputation as the industry’s go-to bailout man during the most recent crypto meltdown.
Executives in the crypto industry started to share proof of reserves in an effort to allay this skepticism. One example is that Crypto.com revealed the cryptocurrency addresses associated with the amount and types of cryptocurrencies it stores on behalf of its users.
However, because the exchange asserts that all user-owned cryptocurrencies are held offline in cold storage in partnership with hardware wallet provider Ledger, users were quick to identify a suspicious transfer of 320,000 ETH to a wallet address connected to Gate.io on October 21, 2022.
Kris Marszalek, the CEO of Crypto.com, admitted that the transaction was a mistake. It was sent to a whitelisted external exchange address instead of the intended new cold storage address, he claimed, adding:
“We worked with the Gate team and the funds were subsequently returned to our cold storage. New process and features were implemented to prevent this from reoccurring.”
Despite the justification, the site has left the crypto community with a negative impression. Many cryptocurrency users have questioned how it was possible for $400 million worth of ETH to be unintentionally sent to an address that wasn’t the intended recipient.
Notably, Crypto.com has erred in a similar manner before. The exchange gained notoriety in August after it came to light that it mistakenly sent investors in Melbourne AUD $10.5 million (worth over $7 million), rather than an AUD $100 ($67) refund. The incident happened in May 2021, but it wasn’t reported until December 2021, which makes it worse.
In the meantime, Binance CEO CZ, who has lately made headlines owing to his role in the FTX issue, recommended people to avoid Crypto.com since it is obvious they lack the necessary expertise.
“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,” he said.