Crypto.com, a Singaporean-based Crypto exchange, is facing scrutiny after it admitted that it erroneously transferred a large amount of Ethereum (ETH) to another exchange. This development came after the collapse of FTX which was once one of the largest exchanges in the industry.
Kris Marszalek, CEO of Crypto.com, stated in a tweet that the incident happened on October 21st, weeks before the FTX started its collapse.
Kris said that the funds were transferred to a whitelisted account at Gate.io, a crypto exchange based in the Cayman island. It was founded in China in 2013 and was formerly known as Bter.com until 2017
Whitelisting an account is a security feature that tells a system that the party where the funds will go is trusted.
According to the tweet, the funds were subsequently returned to their custody and returned to cold storage. Cold storage is done by storing crypto in an offline wallet. This makes it almost impossible to hack because it is disconnected from the internet.
Gate.io also tweeted that they have returned the 320,000 ETH to Crypto.com.
Changpeng Zhao or CZ, CEO of Binance, seemed to have indirectly criticized the incident by saying, “that If an exchange have (has) 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”. SAFU or Secure Asset Fund for Users is an emergency insurance fund created by Binance in 2018 to safeguard customers’ funds.
Though CZ did not name any company, the crypto world immediately pointed out that it was probably a jab against Crypto.com.
Before FTX collapsed CZ tweeted that Binance, the world’s largest crypto exchange, will be liquidating all remaining FTT in their books. His apparent tweet about Crypto.com is a déjà vu for a lot of crypto investors.
The backlash from the wrongful transaction has resulted in a lot of withdrawals from Crypto.com. Fearing that the exchange might fold, customers are probably resorting to transferring digital assets to other exchanges or self-custody
The company has been facing some headwinds even before this ETH transfer mistake. It has been reported to implement layoffs and cutbacks to its marketing expenses. It has also implemented some reward cutbacks to its Crypto.com Visa Card. Its native token CRO has also fallen to below $0.1 from its all-time high of $0.96.
The whole crypto industry, which has been enduring the bear market for the whole of 2022, has seen many big players go bankrupt. FTX, Celsius, and Voyager are some of the names that became insolvent. The error on Crypto.com’s part is something that just can’t be ignored by users who are already on the edge.
The collapse of several big players sent ripples that affected the whole digital asset. Investors can’t be blamed if they scrutinized each transaction their chosen platform takes. As users mature they will either resort to self-custody of their assets or go with companies that value transparency and security. In the end, crypto is all about the community regulating itself.