SINGAPORE - More drama played out at the weekend in the cryptocurrency world, prompting Singapore-based exchange Crypto.com to clear the air that it is not in trouble and its balance sheet is strong.
Chief executive Kris Marszalek, in a live YouTube streaming session on Monday, dismissed concerns that it was collateral damage in rival FTX’s implosion.
Taking questions from the crypto community, he said the company matches its reserves to every coin held on its platform by customers.
“We will just continue with our business as usual, and we will prove all the naysayers (wrong), and there (are) many of these right now on Twitter over the last couple of days,” he said.
Mr Marszalek said the firm will prove naysayers wrong “with our actions” and that within weeks, an audited proof of reserves report will be published.
FTX, a darling of the crypto world, filed for protection from bankruptcy last Friday due to a liquidity crunch, chalking up billions worth of liabilities.
Crypto.com is under the spotlight following what Mr Marszalek described as “an accident”, which saw about US$400 million (S$550 million) sent to the wrong type of account on another exchange.
Twitter users had flagged the transaction as unusual, linking it to allegations that Crypto.com was using cryptocurrency Ether (ETH) to prop up its trading volume. The transaction in question was the transfer of ETH on Oct 21 to the firm’s trusted corporate account at Gate.io
Mr Marszalek said on Monday: “At no point were the funds at risk of being sent somewhere where we could not get it back. It happened over three weeks ago. It had nothing to do with any of the craziness that has been happening since FTX collapsed.”
At the weekend, the CEO had tried to allay concerns in a series of tweets where he said Crypto.com withdrew the funds back to its cold wallets over the following days, after the transfer.
“The entirety of ETH was successfully withdrawn by Crypto.com and returned to our cold storage,” he had said on Twitter.
A cold storage address is a type of wallet that is not linked to the Internet, and it is considered the safest way to prevent digital currencies from being stolen or hacked.
“We have since strengthened our process and systems to better manage these internal transfers,” he had written in a tweet.
Separately, Tether’s eponymous US dollar stablecoin, which is the biggest in the industry, is also under stress as it clocks US$3 billion in redemptions in the past four days, based on CoinMarketCap.
Market watchers say traders are moving to exit the digital asset market on the back of fears that the industry is facing the crypto version of Lehman Brothers.
Some exchanges have been scrambling to distant themselves from FTX following news of the latter’s bankruptcy.
Several are also trying to prevent a crypto run by moving to publish their “proof of reserves” as investor jitters grow.
On its part, Crypto.com last week published its proof of reserves in its crypto wallets. It said it held US$3 billion in total customer assets.
Based on blockchain analytics platform Nansen’s data, the figure for Crypto.com was US$2.55 billion.
“(The) net worth shown is the value of the token holdings in the exchanges’ provided wallets on blockchains that we support.
“It is not to be confused with actual assets belonging to the exchange, as customer deposits (liabilities) are included in the token holdings,” the platform said.
Crypto.com was in June granted an in-principle approval by the Monetary Authority of Singapore to be a digital payment token service provider.
Founded in 2016, the exchange is a key player in the market and has made the news for sponsoring this year’s football World Cup in Qatar, sealing deals with Formula One car racing, and acquiring naming rights to the Staples Centre – home of the American basketball franchise Los Angeles Lakers – in a 20-year deal reportedly worth over US$700 million. The venue is now known as Crypto.com Arena.