Crypto.com, Gate.io, and Huobi engage in "reciprocal" asset rotation to navigate through asset reserve snapshots?
During the announcement of asset reserves by Crypto.com, Gate.io, and Huobi, there were significant transfers of cryptocurrencies, leading to community suspicions of colluding to falsify reserve proofs. In response, Binance CEO Changpeng Zhao urged to stay away from such exchanges.
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Community Questions Crypto.com and Gate.io Reserves
On-chain data shows that on 10/21, the exchange Crypto.com transferred 320,000 ETH to another exchange, Gate.io, coinciding with Gate.io's reserve audit period on 10/19. This led the crypto community to suspect collusion between the two parties in falsifying data.
Crypto.com CEO Kris Marszalek responded, stating it was a sending error and has since returned 285,000 ETH. He explained:
This was supposed to be sent to a new cold wallet address but was mistakenly sent to an external address whitelisted by mistake. We worked with the Gate team to return the funds to the cold wallet and have put in place new processes to prevent such incidents from happening again.
Gate.io founder Lin Han responded:
Gate.io had already completed a reserve audit with the U.S. auditing firm Armanino two days before receiving the 320,000 ETH from Crypto.com on 10/19.
Huobi's Reserve Plummets by 70% After Snapshot?
Wu Blockchain's tweet pointed out that on-chain data shows that Huobi's reserve snapshot still had 14,858 ETH, which immediately transferred 10,000 ETH to Binance and OKX after the snapshot. As of writing, the address "Huobi 34" only had 13 ETH remaining.
However, another address 0x1870 in Huobi's reserve list still holds 140,000 ETH.
Paradigm researcher samczsun responded, stating that both addresses were included in the reserve snapshot, making it unlikely to be used for falsifying reserve proofs.
Due to spreading panic in the crypto market, Huobi's platform token HT has dropped by 23% within the day.
Suspicions
Collusion in Faking Reserve Proofs Among Exchanges?
Venture capital partner Adam Cochran questioned whether the fund transfer mentioned above was a conspiracy involving major exchanges. Although Gate.io had completed the audit before receiving ETH from Crypto.com, the audit report was officially released on 10/28, leading to suspicions of potential falsification.
This is getting wild.
The time that Crypto .com claims to have "accidently" sent user funds was during the Gate proof-of-reserve.
And we just saw similar behavior with Huobi.
Are exchanges passing around ETH loans to pass audits?! https://t.co/y8n1mtLza7
— Adam Cochran (adamscochran.eth) (@adamscochran) November 13, 2022
The Missing 35,000 ETH
Crypto.com transferred 320,000 ETH to Gate.io and returned 285,000 ETH. The community fervently questioned the missing 35,000 ETH, which had actually been transferred back to the address "Crypto.com 5" on 10/24.
Interestingly, Kris, the CEO of Crypto.com, only verbally confirmed the return of the funds amid community panic, leaving it to the community to investigate the related transaction addresses, with transactions being fragmented.
Are User Assets Really in Cold Wallets as Claimed?
In a November 11 announcement, Kris revealed part of the cold wallet reserves, holding nearly $3 billion in digital assets, with the surprising revelation that Shiba Inu coin accounted for 19.84%, surpassing ETH at 17.14%.
Transfers from hot wallets to other exchanges also contradict Crypto.com's claim of 100% storage in cold wallets.
Furthermore, before announcing audit results, Crypto.com transferred a total of $120 million stablecoins to Binance's hot wallet here.
Binance CEO Changpeng Zhao also criticized the fund transfers between exchanges:
If an exchange needs to move large amounts of funds "before" or "after" showing their wallet addresses, it's a clear sign of a problem. Stay away and keep it SAFU.
Related
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- Unable to withstand regulatory pressure! OKX exits Nigerian market, users must withdraw funds by August 16th.
- Nigeria's Central Bank accuses Binance of illegally operating banking activities such as fiat currency exchange and P2P markets.