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Another high-profile crypto exchange known for lavish spending during last year's bull market is in trouble as users question the health of its finances—and make the irresistible parallel to the recently imploded FTX exchange.
But Crypto.com CEO Kris Marszalek says not to worry: all is solvent and above board.
“Our platform is performing business as usual,” Marszalek said in an AMA posted to Twitter on Sunday. “People are depositing, people are withdrawing, people are trading, there’s pretty much normal activity just at a heightened level.”
Marszalek participated in the AMA to address the weekend’s revelations that the exchange, apparently inadvertently, had dispatched $400 million to a rival exchange, Gate.io, at the end of October. The funds were returned just in time for Crypto.com’s “proof of reserves,” prompting some suspicion.
Crypto.com’s token shed 20% of its value on the news, and at least $45 million has since been withdrawn from the exchange, according to the Wall Street Journal, as investors recall the all-too-recent FTX collapse.
Marszalek, however, said it was no big deal and that the funds were sent to Crypto.com’s own whitelisted corporate account on Gate.io.
“The funds were at no risk of being lost,” he said. “The system would not allow us to send money somewhere it can’t be recovered.”
Crypto.com and FTX
Marszalek also took the opportunity to reassure investors about Crypto.com’s accounting practices more broadly.
He said that unlike FTX, which traded user funds and used its own highly volatile token as collateral for their deposits, Crypto.com holds customer assets one-to-one—the relevant tokens or fiat, and nothing else.
“We do not trade customers’ assets,” he said, adding that mixing customer and corporate funds is a “terrible idea” and that it should be “outlawed.”
If true, that means Crypto.com’s solvency isn’t correlated to asset prices; in the event of a crash, deposits and withdrawals should be unaffected.
It’s also why the exchange’s reserves show 20% of its holdings in SHIB, the cryptocurrency based on a dog meme, said Marszalek. The CEO explained that the reason was simple—the token was a “hot meme coin” last year, so many people bought it.
“We store what our customers buy,” he said. “As long as our users are holding it, we’ll be holding it. We have no control over what you guys buy.”
What about FTX? Was Crypto.com hurt by the collapse?
No, says Marszalek, who claimed that Crypto.com’s exposure to the collapse of FTX was minimal.
The exchange, he said, was able to claw back the lion’s share of its $1 billion investment, losing a mere $10 million.
He added that Crypto.com was fully regulated in the UK, EU, US, Canada, and Singapore and said that a full, professional audit was underway—though it might take 30 days or more since serious audits “don’t operate on crypto speed,” he caveated.