Crypto Exchanges Gate.io and Crypto.com Appear to Be Faking Proof of Reserves

In light of the recent FTX implosion, the crypto community is concerned that some crypto exchanges like Gate.io and Crypto.com appear to be faking their reserves.

Community concerns were triggered when a Twitter user highlighted a transfer of 320,000 ETH from Crypto.com to a Gate.io address.

Crypto.com “mistakenly” sent over $400M ETH to Gate.io

Etherscan data, as cited by Conor, showed that Crypto.com sent the funds to Gate.io on Oct. 21 while Gate.io sent back 285k ETH within a week. He noted that both the sender and receiving addresses were connected to Crypto.com.

It was supposed to be a move to a new cold storage address, but was sent to a whitelisted external exchange address. We worked with Gate team and the funds were subsequently returned to our cold storage. New process and features were implemented to prevent this from reoccurring.

— Kris | Crypto.com (@kris) November 13, 2022

However, the CEO of the exchange, Kris Marszalek, explained that the transfer was a mistake. He claimed they were supposed to be transferred to another cold wallet but instead sent to a whitelisted external wallet. 

Marszalek added that “the funds were subsequently returned to our cold storage. New processes and features were implemented to prevent this from reoccurring.”

Community Questions Crypto.com’s Explanation

Meanwhile, many in the crypto community find Crypto.com CEO’s excuse questionable and believe that the transfers might be connected to the exchange lying about its reserve.

The CEO of Crypto(.)com says they accidentally sent $400 million $ETH to the wrong wallet address.

Wildly irresponsible.

Get off these platforms. pic.twitter.com/SABIZPEYWZ

— Dylan LeClair (@DylanLeClair_) November 13, 2022

Adam Cochran highlighted that there were some gaps in Crypto.com’s proof of assets, that the CEO ought to address. Cochran continued that “the answer of “wait for our audit” isn’t good enough. If the assets are there, this should be fairly simple to point to even 80% of these assets to assure users in the meantime. Understand people have reason to be concerned and ask questions in this environment!”

Popular Crypto influencer Ben Armstrong (BitBoy) said he was withdrawing all his assets from Crypto.com and advised others to do the same. According to him, the recent spate of events has taught him the importance of self-custody.

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

Binance CEO Changpeng Zhao also weighed into the situation, saying that an exchange that moves large amounts of crypto before or after its proof-of-reserve is a “clear sign of problems.”

Meanwhile, Crypto.com CEO has criticized the rumors about the exchange, saying that people should focus instead on businesses that had ties with FTX. 

Huobi is Under Spotlight too

Wu Blockchain reported that after Huobi released the snapshots of its asset reserve, 10,000 ETH was transferred from Huobi 34 wallet to Binance and OKX addresses. The Huobi 34, which had over 14k ETH at the time of the snapshot, now has only 4,004 ETH.

In this SPECIFIC instance, the funds in 0xCAc7…c3Fc mostly came from 0x1870…a12e, another Huobi address. Given that both addresses were in the snapshot, it’s unlikely the funds were used to inflate the proof-of-reserveshttps://t.co/H9OiZAeWPZhttps://t.co/ByviUtchwF https://t.co/vetIJ8SBB7 pic.twitter.com/qNjMuX2pib

— samczsun (@samczsun) November 13, 2022

But Paradigm researcher Sam has clarified that the funds in the Huobi 34 wallet came from another Huobi address, and both were in the snapshot. So, it was unlikely that they used the funds to inflate the PoR.

The post Crypto Exchanges Gate.io and Crypto.com Appear to Be Faking Proof of Reserves appeared first on BeInCrypto.

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