Gate.io and Crypto.com are Supposedly Forging Proof of Reserves

Members of the crypto community are concerned about Crypto.com reserves. Crypto.com CEO said the exchange mistakenly sent over 300 ETH to Gate.io.

Nov 14, 2022
by Anvi Saini
Gate.io and Crypto.com are Supposedly Forging Proof of Reserves
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Recently Etherscan, a blockchain analytics company, reported that on October 21, Crypto.com transferred 320,000 ETH from its wallet to a Gate.io wallet. The assets were evaluated at $415.9 million at the time. The Twitter community is ablaze with speculation about the underlying motivations behind the October funds transfer between Gate.io and Crypto.com.

Clarifications by Both Exchanges

Kris Marszalek, Crypto.com's CEO, replied to suspicions by saying the transfer was made by mistake and has already been reversed. He said it was meant to be sent to cold storage. It was mistakenly sent to an address that Gate.io could accept.

On Twitter, Gate.io acknowledged the news. He said that the ETH moved from Crypto.com was not included in the audit of the proof of reserves. The company also disclosed the transaction ID, which proved that Crypto.com had received a full refund. Exchanges often transfer money around for liquidity reasons. The timing of the sale, however, sparked discussions.

Gate.io declared its proof of reserves and made it open source to the public on October 28. According to the report, Gate.io has more than enough ETH reserves to overcollateralize their investors' funds by 104%. However, according to the report, the proof of reserves audit data was obtained on October 19. It basically means Gate.io had 320,000 ETH before the audit.

On Twitter on November 11, Marszalek said that the company had $3 billion in reserves and had provided cold storage wallets for both Bitcoin and Ethereum. The step alleviated concerns about bankruptcy; Marszalek noted that the company would provide complete proof of reserves report in the coming days. 

Marszalek also wrote a Twitter thread in response to accusations that Crypto.com's reserves inflated Gate.io's proof of reserves.

Huobi is also under the Radar

Huobi Global delivered 10,000 ETH to OKX and Binance after providing a snapshot for proof of funds, according to blockchain reporter @WuBlockchain. 

As reported by the user, the address had 14,858 ETH in reserves at the time of the snapshot and 4,044 ETH after the transactions. According to CryptoSlate's investigation of Etherscan data, the wallet mentioned above had 18,225 ETH at the time of writing.

Binance CEO Changpeng 'CZ' Zhao raised users' suspicions and anxieties by cautioning them against exchanges that conduct significant asset transfers before or after providing proof of funding.

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