“The ETH transfers were sent to a whitelisted corporate account at Gate.io.
The funds were sent back to Crypto.com over the following days.
The entirety of ETH was successfully recovered.
In this particular case, the whitelisted address belonged to one of our corporate accounts in a 3rd party exchange instead of our cold wallet.”
Let’s review the timeline.
Crypto.com funds were sent to Gate.io on October 21st. At first glance, this seemingly negates the idea that the funds were sent to assist Gate.io in passing their reserve audit, unless there is deeper corruption behind the scenes. The audit took place on October 19th. You can verify this yourself on their site. The funds were not returned to Crypto.com immediately and they were not returned all at once. More importantly, only 285,000 of the 320,000 were sent in that spree to a known Crypto.com wallet.
What happened to the remaining Ether?
Those coins were reportedly sent to a different address that has yet to be confirmed by Crypto.com. According to Kris, “the entirety of the ETH was successfully withdrawn,” but looking at on-chain records, it is not entirely clear. I am far from an accomplished on-chain analyst, but did a bit of digging myself, looking at the interactions between Gate.io and Crypto.com. The records are a mess.
Why were the funds returned in chunks over time rather than all at once?
Imagine accidentally leaving your wallet, which contains a huge chunk of your net worth, at a friend’s house. When you ask the friend to send it back, he mails the contents individually at different times to different home addresses. And not entirely.
CZ sums it up well here: “if an exchange has to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away.”
To further compound the issues, the mere mention of foul play sends customers running for the exit. We have seen it time and time again. Even if there is nothing wrong, a simple tweet or accusations can cause a bank run and compound the issues.
Rumors of Crypto.com experiencing a bank run are picking up steam.
As an eternal optimist, my natural instinct is to offer these exchanges the benefit of the doubt. Not this time. It’s getting harder and harder in the wake of so many lies, and I would rather be on the sidelines if something bad happens.
Crypto.com made headlines last year for sending an Australian woman $7m instead of $100. Perhaps they did something similar again, although this would be an indication of clear negligence and incompetence. But maybe something more sinister is going on.
It is impossible to discern their intent without more facts, so the interpretation is up to you.
Regardless of the outcome, I expect more carnage this week. The contagion from FTX has just begun to spread.