Crypto.com sent $400 million to the wrong recipient, but got it back this time

Crypto.com sent $400 million to the wrong recipient, but got it back this time

Illustration by Alex Castro / The Verge

Crypto.com just admitted to making another very large and concerning clerical error: it mistakenly sent 320,000 in Ethereum (~$416 million USD) to another cryptocurrency exchange, called Gate.io, about three weeks ago (via Web3 Is Going Just Great). In a post on Twitter, Crypto.com CEO Kris Marszalek says the company was supposed to send the crypto to one of its cold, or offline, wallets, but accidentally sent it to a “whitelisted” address belonging to its corporate account at Gate.io.

This all unfolded after Marszalek publicly posted the company’s cold wallet addresses to provide transparency about what the exchange does with its funds. After digging into Crypto.com’s transactions, one user, Conor Grogan, points out that the exchange sent 320,000 in Ethereum to Gate.io on October 21st, an amount that makes up about 80 percent of the company’s Ethereum holdings.

https://t.co/pFc4Pz9nFR proceeded to withdraw the funds back to its cold wallets over the following days. The entirety of ETH was successfully withdrawn by https://t.co/pFc4Pz9nFR and returned to our cold storage.

— Kris | Crypto.com (@kris) November 13, 2022

Marszalek later added that it was able to recover “the entirety” of the transferred assets. Users on Twitter confirmed that Crypto.com received its funds back about a week later, transferring 285,000 Ethereum (~350 million USD) into one wallet and putting the remaining 35,000 Ethereum (~43 million USD) into another. Gate.io also issued a response, noting that it started returning the funds once it realized the transfer was “an operation error.” But hey, at least Crypto.com’s funds were actually returned this time. In August, a pretty unfortunate typo resulted in Crypto.com giving a customer $7.2 million instead of a $68 refund, which it’s currently suing to get back.

Despite the reassurances from Marszalek that “all our systems are operating normally,” this whole ordeal is sparking withdrawals from the platform as users begin to worry whether Crypto.com will suffer the same fate as the now-bankrupt FTX and other beleaguered firms. Some users speculate whether the transfer was made in order to alter the proof of reserves that numerous crypto exchanges promised to provide in response to FTX’s collapse.

While Gate.io published its asset audit snapshot on October 19th and, clarified that “Crypto.com’s deposit was not included,” Crypto.com provided partial proof of reserves on November 11th. Binance CEO Changpeng “CZ” Zhao appeared to allude to the situation in a tweet on Sunday morning, stating: “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.”