Crypto experts allege Gate.io and Crypto.com could collapse like FTX: Accident or proof-of-reserves?


  • Crypto.com’s cold storage revealed a suspicious transfer of 320,000 Ether worth $404 million to Gate.io. 
  • Kris Marszalek, CEO of Crypto.com, assured traders that the transfer was accidental; funds were to be moved to a new cold storage address. 
  • Experts allege that the transfer helped Gate.io show its proof of reserves of user funds shortly after the transfer. 

Samuel Bankman-Fried’s FTX exchange collapse highlighted the importance of proof-of-reserves for centralized exchanges. When confirming the availability of funds on Crypto.com, cold storage information revealed a suspicious transfer of 320,000 Ether to Gate.io. 

Gate.io completed its proof-of-reserves audit shortly after, arousing the suspicion of experts and analysts on crypto Twitter. 

Also read: Breaking: FTX exchange and FTX US allegedly hacked, uninstall app to protect against malware

Gate.io finishes proof-of-reserves after receiving 320000 ETH transfer

The FTX collapse has raised concerns among crypto traders regarding safety of user funds in exchanges’ cold storage. Exchanges started publishing proof-of-reserves to steer clear of the issues that surrounded the FTX exchange before its collapse. 

Gate.io completed its proof-of-reserves audit on October 28, 2022, merely days after receiving $404 million worth of Ethereum from Crypto.com. When investigating transactions by Crypto.com, on-chain analysts identified a suspicious 320,000 Ether transfer to Gate.io. Kris Marszalek, CEO of Crypto.com, explained this transfer was accidental. Crypto.com intended to move user funds to a new cold storage address, but an accident resulted in the transfer to Gate.io. 

Ethereum transfer from Crypto.com to Gate.io

Ethereum transfer from Crypto.com to Gate.io 

Interestingly, within days of the accidental transfer, Gate.io published its proof-of-reserves report. Solidity developer and on-chain analyst Shegen published evidence of the same on Twitter:

Audit assessment of Gate.io exchange

Audit assessment of Gate.io exchange 

The move by Crypto.com has raised several unanswered questions for crypto traders. FTX exchange’s co-mingling of finances with Alameda research and loss of user funds, reflecting zero balances, have raised red flags. 

Traders on crypto Twitter are worried about Crypto.com and Gate.io’s user funds and the authenticity of proof-of-reserves. Since Crypto.com claims that 100% of user-owned cryptocurrencies are held offline in cold storage, it has raised concerns among traders as to the authenticity of the claim. 

Gate.io clarifies FUD regarding the proof-of-reserves

Gate.io spokesperson told FXStreet that the exchange's snapshot for proof-of-reserves was taken two days before the accidental transfer of Ethereum from Crypto.com. Gate.io was the first mainstream exchange to conduct such an audit in 2020, earning a patent in the process. 

Crypto.com spokesperson assures traders of strong processes and systems

A Crypto.com spokesperson told FXStreet that the Ethereum transfer was made over three weeks ago on October 21. Crypto.com's whitelisted corporate account at Gate.io received the transfer and the exchange proceeded to withdraw the funds back to its cold wallets over the following days. The entire Ether tokens were successfully withdrawn by the exchange and returned to their cold storage and the team at Gate.io assisted by increasing their daily withdrawal limits with them. 

The spokesperson said, 

"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 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 process and systems to better manage these internal transfers."


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Uniswap nears $3 billion in daily trading volume despite Wells notice and fee hike

Uniswap nears $3 billion in daily trading volume despite Wells notice and fee hike

Uniswap's (UNI) price witnessed a double-fold crash in the past week after it received a Wells notice from the SEC and later due to the general crypto market crash over the weekend. In the past week, UNI has decreased more than 38%.

More Uniswap News

Arbitrum Price Prediction: 10% losses likely for holders ahead of $107 million worth of cliff token unlocks

Arbitrum Price Prediction: 10% losses likely for holders ahead of $107 million worth of cliff token unlocks

Token unlocks are considered bearish catalysts, particularly when recipients are likely to cash in for a quick profit. The event, which adds tokens to the project’s circulating supply without increasing demand, leaves an effective imbalance in favor of supply. 

More Arbitrum News

Ethereum recovers from dip as Hong Kong ETH ETF approval sparks whale buying spree

Ethereum recovers from dip as Hong Kong ETH ETF approval sparks whale buying spree

Ethereum's (ETH) price slightly improved on Monday after Hong Kong approved applications for a spot Bitcoin and Ethereum ETF. Whales have also been accumulating ETH after the market dip over the weekend.

More Ethereum News

Bitcoin price delays pre-halving rally as US and China battle for BTC supremacy ahead of halving

Bitcoin price delays pre-halving rally as US and China battle for BTC supremacy ahead of halving

Bitcoin has failed to showcase an enticing pre-halving rally. As the event remains less than a week out, traders and investors remain at the edge of their seats, with thoughts on whether the impact of the fourth cycle will be different than what has been seen before. 

More Bitcoin News

Bitcoin: BTC’s rangebound movement leaves traders confused

Bitcoin: BTC’s rangebound movement leaves traders confused

Bitcoin (BTC) price has been hovering around the $70,000 psychological level for a few weeks, resulting in a rangebound movement. This development could lead to a massive liquidation on either side before a directional move is established. 

Read full analysis

BTC

ETH

XRP