Leading cryptocurrency exchanges are being urged to openly reveal their cold and hot wallet addresses after the collapse of FTX highlighted the value of proof of reserves in reducing risks and boosting investor trust. Cold store data that was discovered when attempting to verify the existence of funds on Crypto.com showed a suspicious transfer of 320,000 Ether (ETH) to a wallet address connected to Gate.io on October 21, 2022.
Concerns were expressed by community member @jconorgrogan regarding the transfer of 320,000 ETH from the cold wallet of Crypto.com to that of Gate.io, as the latter states that all user-owned cryptocurrencies are held exclusively offline in cold storage in collaboration with hardware wallet provider Ledger.
As the conversation heated up, Crypto.com CEO Kris Marszalek disclosed that the cash, which at the time of writing represented 82% of Crypto.com's ETH holding in cold storage, had been transmitted to Gate.io by mistake:
“It was supposed to be a move to a new cold storage address, but was sent to a whitelisted external exchange address.”
Marszalek told the investors that new procedures and features had been put in place to prevent a recurrence while confirming that Gate.io had returned the money to Crypto.com's cold storage.
And why https://t.co/bVgf3bBSGR would send back to https://t.co/2vZHyCacXG 285K ETH 5-7 days later? pic.twitter.com/GhH6QGXntd
— Conor (@jconorgrogan) November 12, 2022
On-chain evidence shows that Gate.io sent Crypto.com back 285,000 ETH, however Marszalek claimed that all money was given back. Further research revealed that the lost 35,000 ETH was transmitted to a different address, which the cryptocurrency exchange has not yet acknowledged.
It's not the first time a mistaken transfer at Crypto.com has made news. Back in August 2022, it was discovered that Crypto.com sent investors in Melbourne, Australia, AUD $10.5 million (worth over $7 million), although the intended return was only to be AUD $100 ($67). Although the incident happened in May 2021, it wasn't discovered until a December 2021 annual audit.
Marszalek stressed the value of transparency and user security and made a commitment to publish the Crypto.com audited proof of reserves on November 10.
We share the belief that it should be necessary for crypto platforms to publicly share proof of reserves and https://t.co/pFc4Pz9nFR will be publishing our audited proof of reserves.
— Kris | Crypto.com (@kris) November 10, 2022
Investors now have the chance to verify the existence of their assets, which eventually prohibits business owners from misusing the cold storage funds. The majority of cryptocurrency businesses are willing to publish their proof of reserves.
