Customers pulled funds from Crypto.com over the weekend after the company’s chief executive said the cryptocurrency exchange mishandled a roughly $400 million transaction.
Crypto.com Chief Executive
Kris Marszalek
said on Twitter that the transfer was sent to the wrong type of account on another exchange. The transfer of a large chunk of ether, a popular cryptocurrency, took place on Oct. 21, but came to light after Twitter users flagged the transfer as unusual, based on publicly available blockchain transaction records.
Concerns about Singapore-based Crypto.com spread across the internet over the weekend, with prominent digital-currency figures taking aim at the company. Cryptocurrency traders are on edge following the quick collapse of FTX, which went from one of the most trusted exchanges to bankrupt in the course of a week.
Changpeng Zhao,
chief executive at Crypto.com’s larger peer Binance, appeared to question the nature of the transfers without naming the company, which may have fueled Sunday’s withdrawals, according to crypto industry players. “If an exchange [has] to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems,” Mr. Zhao tweeted Sunday.
The value of Crypto.com’s own cryptocurrency sank roughly 20% Sunday from the prior 24 hours. It traded near 6 cents apiece.
Mr. Marszalek dismissed the concerns about Crypto.com, tweeting later on Sunday that the October transfers had “generated so much [fear, uncertainty and doubt] & speculation on Twitter” weeks later.
A spokesman for Crypto.com said that the platform was seeing higher levels of activity, noting that it had assets fully matching customer deposits. “Fluctuations in deposit and withdrawal activity does not affect our levels of service,” he added.
An outside analysis of Crypto.com’s public blockchain from Argus Inc., a blockchain analysis firm, showed that between 7 p.m. EST Saturday and 5:30 a.m. EST Sunday, users withdrew a net $14 million worth of the cryptocurrency ether and $39 million worth of other tokens tied to the Ethereum network from Crypto.com. Over that same time, Crypto.com moved $33 million from other wallets to meet customer demands, according to Argus.
It appeared that Crypto.com had enough funds to meet user withdrawals, said Owen Rapaport, co-founder of Argus.
Crypto.com is a midsize exchange. It has tried to raise its profile over the past year among retail investors. In late 2021, it sponsored the arena that is home to LeBron James and the Los Angeles Lakers, renaming it the Crypto.com Arena from the Staples Center. It also ran its first Super Bowl ad this year and is a global partner of Formula One.
The transaction that sparked concerns about Crypto.com involved the transfer of 320,000 ether—or roughly $400 million worth of the token at the time—to a wallet linked to crypto exchange Gate.io on Oct. 21.
Over the weekend, Mr. Marszalek said on Twitter that the transfer was supposed to be a “move to a new cold storage address,” but was sent to an external exchange address.
“We have since strengthened our process and systems to better manage these internal transfers,” he said on Twitter.
A cold storage address is a type of wallet that is unplugged from the internet. It is considered the safest way to prevent digital currencies from being stolen or hacked.
Mr. Marszalek said the company had worked with Gate.io to return the funds back to its cold storage.
“It’s not looking good for these guys in general,” tweeted Adam Cochran, founder of venture-capital firm Cinneamhain Ventures, which invests in blockchain-related companies.
After FTX’s troubles began last week, a number of cryptocurrency exchanges, including Crypto.com, promised to publish proof of their reserves in the spirit of transparency. The audited proofs allow users to check that their own assets are covered by an exchange’s reserves.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Elaine Yu at elaine.yu@wsj.com
Coming every Saturday, Hodler’s Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more — a week on Cointelegraph in one link.
Top Stories This Week
DC Attorney General sues Michael Saylor and MicroStrategy for tax evasion
MicroStrategy co-founder Michael Saylor faces charges of evading United States income taxes he allegedly incurred while living in Washington, DC. The office of the region’s attorney general, Karl Racine, has sued Saylor and MicroStrategy on claims that the firm helped Saylor evade over $25 million in DC income tax. The charges, stemming in part from an amendment to DC’s False Claims Act encouraging whistleblowers to report tax evasion, mean Saylor could see $75 million in penalties.
Crypto.com backs out of $495M sponsorship deal with UEFA Champions League: Report
Crypto.com has decided not to go through with a $495 million sponsorship agreement in response to possible regulatory issues. The sponsorship deal with the Union of European Football Associations (UEFA) would have seen Crypto.com advertised in the UEFA Champions League for five seasons. The crypto exchange was reportedly in sponsorship talks after the Champions League removed Gazprom, an energy company owned by the Russian state, as a sponsor. Crypto.com already has several high-profile advertising efforts under its belt, such as a commercial starring American actor Matt Damon.
Indonesia plans to set up its crypto bourse by the end of 2022
Indonesia could have a crypto bourse, also known as a crypto exchange, constructed by its government before 2023 arrives. Initially unveiled in late 2021, the crypto bourse’s completion has taken longer than expected, but the government aims to get things right instead of rushing a launch. “We will make sure that every requirement, procedure and the necessary steps have been taken,” Jerry Sambuaga, Indonesia’s deputy trade minister, told DealStreetAsia.
Tether requests Roche Freedman to be booted from class action
Tether and Bitfinex are still locked in a lawsuit that began in 2019 alleging that the USDT stablecoin was used to manipulate the cryptocurrency market. The legal team for Tether and Bitfinex is seeking that the plaintiff‘s legal counsel, the law firm Roche Freedman, be let go from the case due to the firm’s involvement with Kyle Roche — the subject of a recent CryptoLeaks video claiming he misused privileged information to “harm” Ava Labs competitors in exchange for AVAX tokens. Kyle Roche recently moved to dismiss himself from multiple legal cases, including the one involving defendant Bitfinex and Tether. However, the defendant still wants the Roche Freedman firm out of the lawsuit completely, in addition to requesting that their private information be destroyed or returned by Roche Freedman.
Central African Republic court says new $60,000 citizenship-by-crypto-investment program is unconstitutional
In July, the Central African Republic (CAR) launched its Sango hub — a new crypto-focused initiative aimed at expanding the adoption of Bitcoin and creating a special economic zone in the Metaverse. The initiative also included the creation of a Bitcoin-backed digital asset called Sango that also allowed foreign nationals to purchase citizenship in the country for $60,000 in crypto, with an equivalent amount of Sango tokens held in collateral for five years. The CAR’s Constitutional Court deemed the efforts unconstitutional, however, noting that citizenship does not have a price tag.
Winners and Losers
At the end of the week, Bitcoin (BTC) is at $20,369, Ether (ETH) at $1,636 and XRP at $0.33. The total market cap is at $1.00 trillion, according to CoinMarketCap.
Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Celsius (CEL) at 36.41%, eCash (XEC) at 20.70% and Lido DAO (LDO) at 18.05%.
The top three altcoin losers of the week are Helium (HNT) at -24.47%, Avalanche (AVAX) at -10.41% and Arweave (AR) at -9.92%.
For more info on crypto prices, make sure to read Cointelegraph’s market analysis.
Most Memorable Quotations
“Building new things is not for the faint hearted.”
Neil Dundon, founder of CryptoRecruit
“Ethereum is about permissionless innovation, free enterprise, property rights, globalization.”
Ryan Berckmans, member of the Ethereum community
“We eventually came round to the idea at Coinbase that we’re going to have to be agnostic to every chain and token that is coming out. We can’t sit here in our ivory tower only focused on one asset.”
Brian Armstrong, CEO of Coinbase
“I feel that [crypto] cannot be partisan.”
Tom Emmer, member of the U.S. House of Representatives
“Most of crypto is still junk, actually. I mean, with the exception of, I would say, a few dozen tokens, everything else that has been mentioned is either noise or, frankly, it’s just gonna go away.”
Umar Farooq, head of Onyx, JPMorgan’s digital assets unit
“Cryptocurrencies have taken a life of their own outside of the distributed ledger — and this is the source of the crypto world’s problems.”
Ravi Menon, managing director of the Monetary Authority of Singapore
Prediction of the Week
Bitcoin squeeze to $23K still open as crypto market cap holds key support
For most of this week, Bitcoin could not decide whether it wanted to stay above or below $20,000, trading north and south of the level numerous times, according to Cointelegraph’s BTC price index.
In a Friday tweet, pseudonymous Twitter user “il Capo Of Crypto” noted that a possible short squeeze could occur if BTC rose above the $20,700-to-$20,800 price zone. Pending a break of this level, Bitcoin could then hit between $22,500 and $23,000. On the flip side, dropping below $19,500 would likely take the squeeze off the table, especially if the asset continued to drop below $19,000.
FUD of the Week
FBI issues alert over cybercriminal exploits targeting DeFi
This week, a public service announcement from the United States Federal Bureau of Investigation (FBI) cautioned the public over a proliferation of decentralized finance (DeFi) exploits, stating that those interested in DeFi should be careful. The agency also noted that DeFi platforms should conduct code audits to check for weaknesses. Dwarfing totals from 2020 and 2021 combined, nefarious actors have pilfered more than $1.6 billion via DeFi exploits so far in 2022 per data from CertiK, a blockchain security company.
Accomplice of ‘Cryptoqueen’ Ruja Ignatova faces extradition to US: Report
British citizen Christopher Hamilton, alleged accomplice of Ruja Ignatova, could see extradition to the U.S. thanks to a ruling from a judge in the United Kingdom. However, the move still requires approval from a U.K. government executive authority. Hamilton allegedly had a hand in the $4 billion OneCoin Ponzi scheme connected to Ruja Ignatova, aka the “Cryptoqueen.” In June, the FBI added Ignatova to the list of its ten most sought-after fugitives. Charges against Hamilton include laundering $105 million in connection to the Ponzi scheme.
Sneaky fake Google Translate app installs crypto miner on 112,000 PCs
The crypto and technology sectors are often riddled with tech traps and scams. One particular effort, ongoing since 2019, is particularly tricky. A certain type of malware named “Nitrokod” sits hidden within counterfeit computer apps and starts mining Monero (XMR), but only after a few days have passed. The malware lies within convincing versions of fake apps, such as a Google Translate app that boasts numerous positive reviews online. An official Google Translate desktop app does not even exist, however, but this malware-infused app has become a top search result. Nitrokod malware has affected over 100,000 devices spanning almost a dozen countries.
Best Cointelegraph Features
Billions are spent marketing crypto to sports fans — Is it worth it?
“Without explicit use cases tied to the massive dollars paid for sports marketing sponsorships, the branding only leads to logo exposure.”
Get ready for the feds to start indicting NFT traders
Securities and Exchange Commission regulators should move to protect investors from traders who distort the NFT market with manipulative trades — and they probably will soon.
Why interoperability is the key to blockchain technology’s mass adoption
Interoperability enables blockchain networks and protocols to communicate with each other, making it easier for everyday users to engage with blockchain technology.
What would you do if you checked your bank account and found millions that shouldn’t be there?
For a woman in Australia — who faced that scenario last year after the cryptocurrency platform Crypto.com mistakenly transferred 10.5 million Australian dollars ($7.2 million) to her bank account — the answer was: Buy a mansion.
Now, a judge in southeastern Australia has ordered the sale of the property — which the woman apparently bought as a gift for her sister who lives overseas — and awarded all proceeds from the sale to the crypto company.
The cautionary tale has attracted international attention, particularly since it emerged that it took seven months for Crypto.com to notice the error.
Katie Gregory, a spokeswoman for Crypto.com, wrote that the company could not comment “as the matter is before the courts.”
A woman checked her spam and found she won $3 million in the lottery — but you should still be wary of scams
Crypto.com is best known outside the cryptocurrency world as the company whose name now adorns the former Staples Center in Los Angeles — and for Super Bowl commercials featuring actor Matt Damon and basketball star LeBron James that frame cryptocurrency investors as pioneers, under the tagline “Fortune favors the brave.”
It laid off 5 percent of its corporate workforce in June amid a widespread downturn in the cryptocurrency market.
Analysis: The celebs have gone crypto
The Supreme Court of Victoria heard that in May 2021, Crypto.com, which operates under a different company name in Australia, mistakenly transferred some $7.2 million to Thevamanogari Manivel instead of the roughly $68 refund she was due. The error occurred when an employee accidentally filled out the payment amount field with an account number, the court said.
“Extraordinarily, the Plaintiffs allegedly did not realise this significant error until some 7 months later, in late December 2021,” during an audit, the court said in its judgment. In February, after looking into what happened, the company sought to place a freeze order on Manivel’s accounts to recoup the full amount, according to background on the case released by the court.
However, Crypto.com submitted evidence showing that Manivel had already transferred most of the money to an account held jointly with another defendant, who may have been in a “romantic relationship” with Manivel, according to evidence heard by the court. Manivel also sent nearly $300,000 to her daughter, and in February, she purchased a property in Craigieburn worth $925,000 for her sister, Thilagavathy Gangadory, who lives in Malaysia.
The four-bedroom, four-bath mansion about 20 miles north of Melbourne sits on more than 5,800 square feet of land and features a private cinema, a gym and two-car parking, according to the Australian website realestate.com.au.
Lawyers for Manivel and Gangadory were not listed on the judgment document.
A Mega Millions host mangled the winning number. Some still got paid.
Crypto.com’s Australian companies have been engaged in litigation against Manivel, Gangadory and six other defendants ever since. In May, Judge James Dudley Elliott issued a default judgment in the case against Gangadory — meaning she did not file a notice of appearance by the deadline set by the court. Elliott thus ruled in favor of the plaintiff, Foris GFS Australia Pty Ltd., which helps operate Crypto.com’s trading platform in Australia.
The company’s lawyers were apparently unable to reach Gangadory, the court said, although she appeared aware that the case was ongoing because her sister’s lawyers said in March that Gangadory was seeking legal advice.
Under the judge’s ruling, published last week, Foris GFS was awarded all proceeds and interest from the sale of the property in Craigieburn. Gangadory was ordered to pay the company’s legal costs related to the case, as well as 10 percent interest, which amounts to nearly $19,000, the court said.
Gangadory can appeal, but she must provide “a good reason for not filing documents, a valid defence to the case, and give reasons why the court should not have made the order” against her, according to the Victoria County court. The next court date is Oct. 7, when the judge will set out the next steps of the case in what is known as a “directions hearing.”
