Thousands of clients of the cryptocurrency exchange platform Crypto.com pulled out their funds from the site over the weekend after the company's chief executive admitted to "mishandling" a transaction involving roughly $400 million worth of crypto assets.
Crypto.com CEO Kris Marszalek said on Twitter that the $400 million transfer was mistakenly sent to the wrong type of account on another cryptocurrency exchange. The transfer involved a large amount of ether, the second-most popular crypto asset in the world, and took place on Oct. 21.
Marszalek hoped to keep the incident buried, but was forced to admit to it after the platform's users looked at its blockchain transaction records, flagged the transfer as unusual and wrote about it on Twitter to get the attention of Crypto.com executives.
Concerns regarding the safety of crypto assets stored on Crypto.com grew following Marszalek's admission.
Analysis of public blockchain data done by blockchain analysis firm Argus Inc. showed that, between 7 p.m. EST on Saturday, Nov. 12, through 6:30 a.m. EST on Monday, Nov. 14, Crypto.com users withdrew over $68 million in ether and $120 million in other tokens backed by the Ethereum network.
During this time, Crypto.com had to add $62 million in ether and $140 million in other digital assets to its own stocks to meet withdrawal demand.
Delma Wilson, writing for CoinPedia, noted that for just a few hours on Monday, Crypto.com recorded nearly 90,000 unique transactions, indicating that many customers are still trying to withdraw their funds from the exchange and that people are still not ready to put their trust back into the company.
Crypto.com CEO claims company remains strong despite rise in withdrawals
In an "AMA" (ask me anything) on YouTube, Marszalek claimed that Crypto.com's balance sheet is "tremendously strong" despite the rise in withdrawals.
"Our platform is performing business as usual," said Marszalek. "People are depositing, people are withdrawing, people are trading, there's pretty much normal activity – just at a heightened level."
Regarding the incident with the mishandled $400 million transaction, Marszalek said he will keep working as though everything was "business as usual" with the company.
"We will just continue with our business as usual, and we will prove all the naysayers – and there is many of these right now on Twitter in the last couple of days – we'll prove them all wrong with out actions," he said. "We'll continue operating as we have always operated to continue being a safe and secure place where everybody can access crypto."
The CEO also attempted to put to rest any fears from clients and investors that the liquidity crisis consuming cryptocurrency exchange FTX will affect Crypto.com, claiming the company did not engage in the kinds of potentially illicit practices that led to its downfall. (Related: Binance backs out of bailout plan to rescue FTX, causing further turmoil across crypto markets.)
"We never engage as a company in any irresponsible lending practices, we never took any third-party risks," Marszalek said. "We do not run a hedge fund, we do not trade customers' assets. We always had one-to-one reserves."
Marszalek did admit that the company transferred approximately $1 billion in crypto to FTX over a year but he said these transactions were aimed at "hedging" customers' orders. Crypto.com "only had exposure of under $10 million when FTX shut down," he said.
"We are not taking any market risk, we are always market neutral. But it also means there must be fund flows between our venue and other venues in the industry, and FTX was one of them," he added.
Marszalek said the company will publish an independently audited "proof of reserves" within the next 30 days to prove to investors that the company is not losing money.
"The objective of the audit is to verify independently that every single coin on the platform is matched by our reserves," said Marszalek.
Learn more about the crypto crash at CryptoCult.news.
Listen to this episode of the "Health Ranger Report" as Mike Adams, the Health Ranger, talks to John Perez, the Crypto Nostradamus, about what comes next following the most recent crypto crash.
This video is from the Health Ranger Report channel on Brighteon.com.
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