Crypto.com has acknowledged a mistake it made, in transferring 320,000 ETH to the wrong cryptocurrency exchange. According to The Verge, the error amounted to $416 million USD, which was put in Gate.io, three weeks ago.
Kris Marszalek, the CEO of the website, said that they were supposed to send it to one of its cold wallets. The funds that were mistakenly sent to the whitelisted address, account for 82% of Crypto.com's ETH holding in cold storage.
Discovery of the Error
Ethereum Flash Crash SHIYAN, CHINA - NOVEMBER 9, 2022 - Financial Illustration: Ethereum, Shiyan City, Hubei Province, China, 9 November 2022. (Photo credit should read CFOTO/Future Publishing via Getty Images)
The website CEO posted the addresses of its cold wallets, to be transparent about the exchanges regarding its funds. This is to confirm its claims that all of the user-owned cryptocurrencies are held offline in cold storage. The discovery of the transfer raised the concern of Conor Grogan, which he expressed on Twitter. He questioned why Crypto.com sent the 320K ETH to Gate.io on October 21, and why Gate.io sent back 285K ETH five to seven days later.
However, Marszalek claimed that he recovered all of the funds. The recovery was confirmed by other users after about a week. The assets were split and placed in two wallets, which amounts to 285K ETH or $350 million, and 35K ETH or $43 million. A Crypto.com spokesperson stated that the whitelisted address on Gate.io was under the ownership of the website. Crypto.com CEO reassured investors, that they have taken steps to implement new processes and features, so the mistake won't happen again, as mentioned by Coin Telegraph.
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
Gate.io responded to the mistake, stating that it began returning the funds as soon as it discovered the operation error. Marszalek assured its users and said that their systems are operating normally. However, reports say that this did not assuage the fears of the users, and some are already making withdrawals. Some concerns are linked to the tragic bankruptcy of FTX and other firms, as they worry that Crypto.com may go down the same path.
Read Also: What Happens If Bitcoin Becomes the Main Currency Across the Globe?
Not the First Time
Crypto.com isn't new to sending funds to the wrong address. Previously, $7.2 million USD was sent to a customer accidentally. It was a large leap to the amount that should've been sent, since only $68 was supposed to be refunded to the customer. This was due to an employee accidentally typing in the account number instead of the payment amount. The transfer was done in May 2021, but the error was discovered in December of that year.
Crypto.com has filed a lawsuit in the Victoria Supreme Court, against the customer in question, Thevamanogari Manivel. Problem is, Manivel along with her partner already spend some of the money. They bought luxury houses, furniture, and art, according to news.com.au. Reports say that one of the houses was worth $1.35 million.
An indictment against Manivel and his partner may be presented in February, according to prosecutor Damian Ellwood. Manivel pleaded not guilty to theft. On March 21st or 2023, the couple will return to court for a directions hearing.
Related: Crypto.com Mistakenly Refunds Someone $7.2 Million, Doesn't Notice The Error for 7 Months
