Crypto.com Under Fire for MEME Coin Reserves and Fishy ETH Transfer

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• Crypto.com has revealed 20% of its reserves are in Meme coin SHIB.
• The exchange is yet to clarify a missing 35000 ETH transferred to Gate.io.
• The exchange’s users have started withdrawing their funds.

During the FTX crash, cryptocurrency exchange Crypto.com grabbed headlines by disclosing it had 20% of its holdings in the Shiba Inu (SHIB) token, a wildly speculative “meme coin.” The reports came in a bid to boost transparency between the platform and its users amidst the cryptocurrency market meltdown.

Per Nansen data, nearly $558 million, which accounts for 20% of the total assets in Crypto.com’s wallets, are in SHIB. The $872 million in Bitcoin the exchange holds is the only thing worth more than its SHIB holdings. The quantity of SHIB held is also significantly higher than the $487 million in ether (ETH).

Explaining why the exchange holds such large quantities of a speculative token, a Crypto.com spokesperson explained:

“The reason our Proof of Reserves include Shiba is because we hold customers’ balances 1:1. Thus, our Proof of Reserves are dictated by our customer holdings.”

Amidst these revelations, concerns were also raised regarding a suspicious transfer of 320,000 Ether from Crypto.com to a wallet address linked to Gate.io on October 21, 2022, pointed out by Twitter user @jconorgrogan. This was concerning, especially because Crypto.com claims that all of its user-owned funds are stored offline in cold storage.

According to Crypto.com CEO Kris Marszalek, the funds had been transmitted to Gate.io accidentally. Marszalek told investors that Gate.io had returned their money to Crypto.com’s cold storage and that new processes and security measures had been put in place to prevent a recurrence.

On-chain evidence supports Marszalek’s claim, but funds were returned only partially. Per the data only 285,000 ETH was sent back to Crypto.com by Gate.io. Upon further inspection, it was discovered that the missing 35,000 ETH had been transferred to a different wallet address, which the exchange is yet to confirm.

With these events transpiring, the crypto community has been on edge, with many users withdrawing their funds from Crypto.com. Cryptocurrency commentator and influence Ben Armstrong was among the many to cash out.

I just withdrew all my funds off https://t.co/hKkLMzo7Sl. I don’t necessarily think anything is wrong with @cryptocom… but if you haven’t learned the importance of self-custody by now then there may be no hope for you.Not your keys, not your crypto

— Ben Armstrong (@Bitboy_Crypto) November 13, 2022

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