As the ecosystem’s confidence in centralized platforms is at an all-time low, we learn that last October Crypto.com sent 320,000 ETH to Gate.io by mistake. This represented about $410 million at the time of the incident.
Crypto.com transfers 320,000 ETH to Gate.io by mistake
It looks like 2022 is going to be a time of sloppiness on the part of some platforms. After the questionable actions of FTX and Celsius that led to their bankruptcy, we learn that almost a month ago, Crypto.com made the mistake of sending 320,000 ETH from its reserves to the Gate.io exchange.
In fact, although this matter is now coming to light, the transaction dates back to October 21 and all the funds have since been recovered according to Kris Marszalek, CEO of Crypto.com:
The ETH transfers that generated so much FUD on Twitter today were made over three weeks ago, on October 21st to https://t.co/pFc4Pz9nFR‘s whitelisted corporate account at https://t.co/Mr9GCkL2gV
– Kris | Crypto.com (@kris) November 13, 2022
The Crypto.com executive explained that this was due to an error when moving to a new storage address, as the company has a corporate account at Gate.io. This address would indeed be part of a whitelist of portfolios owned by the platform:
In this particular case, the whitelisted address belonged to one of our corporate accounts on a third-party exchange instead of our cold wallet. We have since strengthened our process and systems to better manage these internal transfers. “
For his part, Changpeng Zhao, the CEO of Binance, was quick to respond by saying there was a problem if an exchange moved large amounts of cryptocurrencies before or after disclosing its address:
If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away. Stay SAFU 🙏
– CZ 🔶 Binance (@cz_binance) November 13, 2022
No two without three
Not only does this mishandling have the merit of being underlined by the amount involved, about 410 million dollars at the time of the facts, but also because it is the second time (at least officially) that Crypto.com makes such a mistake. And for good reason, the exchange had already mistakenly transferred $10.5 million to a user in May 2021.
While the “mistake is human”, it should be noted that we are talking about a world-class platform with billions of dollars under management, not a beginner with a portfolio of a few hundred dollars.
In this case, it has not been officially clarified whether it was customer funds or corporate cash, although the address referred to suggests that these ETH did indeed belong to the users.
To a lesser extent, we can also question the fact that Crypto.com, which acts as a trusted third party to investors, stores part of its reserves with another trusted third party. Indeed, in the event of bankruptcy, this increases the risk of contagion.
While this event fortunately did not have any serious consequences, it is resurfacing in a context that, with the FTX affair, is not helping to regain the ecosystem’s trust in centralised platforms.
