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


Share:
  • 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

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

Ocean Protocol Price Prediction: Stunning bullish signals going unnoticed

Ocean Protocol Price Prediction: Stunning bullish signals going unnoticed

Ocean Protocol (OCEAN) price has outperformed nearly all of the cryptocurrencies in the space. The parabolic move shows no signs of slowing down yet little coverage has surfaced from crypto media outlets. This article analyzes OCEAN’s price action to gauge where it may find resistance ahead.

More Crypto News

Hedera Hashgraph Price Prediction: A potential bullrun with caution

Hedera Hashgraph Price Prediction: A potential bullrun with caution

Hedera Hashgraph price shows potential to continue its uptrend. The consolidation phase could be viewed as a buying opportunity in hindsight. However, the risk to the downside should be considered.

More Hedera News

SushiSwap price rises by 8% following social coordination launch; AAVE, MKR next?

SushiSwap price rises by 8% following social coordination launch; AAVE, MKR next?

SushiSwap price noted a sharp rise during the intra-day trading hours, which was followed by a special announcement by the leaders of the Decentralised Finance (DeFi) space. 

More SushiSwap News

Decentraland Price Prediction: Consolidation before the next move

Decentraland Price Prediction: Consolidation before the next move

Decentraland price has seen impressive growth in recent months, with a 145% rally last month alone. However, the crypto asset has faced some cooling off lately, losing 7% of its market value in the last three days.

More Decentraland News

Bitcoin: Nonfarm Payrolls on the radar after Powell’s speech propels BTC higher

Bitcoin: Nonfarm Payrolls on the radar after Powell’s speech propels BTC higher

Bitcoin (BTC) price is at an inflection point as it continues to rally amid multiple sell signals on lower time frames. The Nonfarm Payrolls (NFP) report, including the unemployment rate and average hourly earnings, is set to be announced on February 3 at 1330 GMT.

Read full analysis

BTC

ETH

XRP