See More

Crypto Exchanges Gate.io and Crypto.com Reportedly Faking Proof of Reserves

3 mins
Updated by Ali M.
Join our Trading Community on Telegram

In Brief

  • Members of the crypto community are concerned about Crypto.com reserves.
  • Crypto.com CEO said the exchange mistakenly sent over 300 ETH to Gate.io.
  • BitBoy Crypto advised community members to withdraw their tokens from the exchange.
  • promo

Update Nov 13 (14:00UTC): Crypto.com have replied the movement of funds, stating that “The ETH transfers were made over three weeks ago, on October 21st to Crypto.com’s whitelisted corporate account at Gate.io. Crypto.com proceeded to withdraw the funds back to its cold wallets over the following days. The entirety of ETH was successfully withdrawn by Crypto.com and returned to our cold storage. The team at Gate.io assisted us by increasing our daily withdrawal limits with them. Fund movements from Crypto.com custody systems are only possible between approved and whitelisted addresses attached to our cold wallets, our hot wallets, and our corporate accounts at 3rd party exchanges. In this particular case the whitelisted address belonged to one of our corporate accounts in a 3rd party exchange instead of our cold wallet. We have since strengthened our processes and systems to better manage these internal transfers.”

In light of the recent FTX implosion, the crypto community is concerned that some crypto exchanges like Gate.io and Crypto.com appear to be faking their reserves.

Community concerns were triggered when a Twitter user highlighted a transfer of 320,000 ETH from Crypto.com to a Gate.io address.

Crypto.com “mistakenly” sent over $400M ETH to Gate.io

Etherscan data, as cited by Conor, showed that Crypto.com sent the funds to Gate.io on Oct. 21 while Gate.io sent back 285k ETH within a week. He noted that both the sender and receiving addresses were connected to Crypto.com.

However, the CEO of the exchange, Kris Marszalek, explained that the transfer was a mistake. He claimed they were supposed to be transferred to another cold wallet but instead sent to a whitelisted external wallet. 

Marszalek added that “the funds were subsequently returned to our cold storage. New processes and features were implemented to prevent this from reoccurring.”

Community Questions Crypto.com’s Explanation

Meanwhile, many in the crypto community find Crypto.com CEO’s excuse questionable and believe that the transfers might be connected to the exchange lying about its reserve.

Adam Cochran highlighted that there were some gaps in Crypto.com’s proof of assets, that the CEO ought to address. Cochran continued that “the answer of “wait for our audit” isn’t good enough. If the assets are there, this should be fairly simple to point to even 80% of these assets to assure users in the meantime. Understand people have reason to be concerned and ask questions in this environment!”

Popular Crypto influencer Ben Armstrong (BitBoy) said he was withdrawing all his assets from Crypto.com and advised others to do the same. According to him, the recent spate of events has taught him the importance of self-custody.

Binance CEO Changpeng Zhao also weighed into the situation, saying that an exchange that moves large amounts of crypto before or after its proof-of-reserve is a “clear sign of problems.”

Meanwhile, Crypto.com CEO has criticized the rumors about the exchange, saying that people should focus instead on businesses that had ties with FTX. 

Huobi is Under Spotlight too

Wu Blockchain reported that after Huobi released the snapshots of its asset reserve, 10,000 ETH was transferred from Huobi 34 wallet to Binance and OKX addresses. The Huobi 34, which had over 14k ETH at the time of the snapshot, now has only 4,004 ETH.

But Paradigm researcher Sam has clarified that the funds in the Huobi 34 wallet came from another Huobi address, and both were in the snapshot. So, it was unlikely that they used the funds to inflate the PoR.

Top crypto projects in the US | June 2024

Trusted

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.

Oluwapelumi-Adejumo.png
Oluwapelumi Adejumo
Oluwapelumi believes Bitcoin and blockchain technology have the potential to change the world for the better. He is an avid reader and began writing about crypto in 2020.
READ FULL BIO
Sponsored
Sponsored