...and is definitely not an enormous grift that's pouring lighter fluid on our already smoldering planet.
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The fine was announced in March 2024, and Crypto.com said it had appealed the penalty.
Crypto.com was hardly the first exchange to fall afoul of the regulator: Binance was fined $3.35 million in July 2022 for the same, and Coinbase was hit with a $3.6 million for the same in January 2023. Binance later shut down their Dutch operations after failing to obtain a license.
Lawrence is now suing Crypto.com, although this may be challenging given they apparently weren't behind the scam. Lawrence has also said that he has sold his house to pay for legal costs.
Sources cited by the FT allege that Crypto.com made "absolutely dramatic sworn statements that Crypto.com was in no way involved in trading" to other trading houses, and claim that employees were asked to lie about the existence of internal market makers. Crypto.com has refuted these allegations, and acknowledged that they run a market maker.
"This is not a controversial practice," Crypto.com said about the controversial practice.
This comes in the wake of various crypto exchanges — Binance included — appearing to have difficulties with banking. On January 21, Binance announced that users wouldn't be able to use SWIFT for transfers below $100,000 via Signature Bank. Meanwhile, Crypto.com's Lithuanian payment processor, Transactive, has faced a crackdown from the Lithuanian banking regulator leaving Crypto.com users without access to Euro-denominated deposits and withdrawals.
On December 7, a branch of Mazars Group had published a "proof of reserves" report for Binance — though it only accounted for Bitcoin, and did not reflect liabilities for Binance's lending product. On December 9, Crypto.com also published a "proof of reserves" report that had been produced by the firm.
As of December 16, the Binance audit — which had been hosted on Mazar's website — had been deleted.
"Proof of reserves" reports have been offered by various cryptocurrency exchanges in lieu of proper audits, but have reasonably failed to reassure many customers of those exchanges. These reports do not involve the scrutiny that would be applied by a full audit — they only reflect a snapshot of assets at a point in time, and do not show a firm's liabilities.
Crypto.com's CEO, Kris Marszalek, replied: "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." He later clarified that all of the funds were returned.
Twitter users, reasonably, reacted in horror at the revelation that the platform had accidentally sent such a substantial portion of their funds elsewhere in a careless mistake, and that such a monumental mistake was even possible. They were lucky that they erroneously sent the funds to another exchange, and one who agreed to return the funds.
This is not the first time Crypto.com has erroneously transferred funds; in August of this year, they sued a woman to whom they'd accidentally sent $7.2 million that wasn't hers.
Marszalek also tried to discourage employees from leaking about the layoffs, saying at a company town hall: "A number [of employees laid off] makes for a great headline, it's a great thing to gossip about. [But] as co-owners of this company, you should ask yourself, 'is it in my interest for this number to be out there?'" One employee told The Verge that this did nothing to assuage their fears about the layoffs, and that "[it felt like] I got told to shut up and get back to work. It felt insulting."
One recent review on Glassdoor claims that Crypto.com had laid off "more than 1,000 employees", and alleged that "They've removed the company directory so we can't see the numbers go down."
These announcements followed a June 2 layoff announcement by Gemini and the announcement by Coinbase that same day that they would be rescinding already-accepted job offers.
Rumors of a downturn across the tech industry more broadly have been swirling for several months, but crypto companies appear to be being hit particularly hard as they simultaneously endure "crypto winter".
On May 13, the company announced it would be reversing transactions made during an hour-long period on May 12 when "users who traded LUNA were quoted an incorrect price". Some users were able to profit off the discrepancy, but later were told that their transactions were being reversed. Crypto.com offered $10 in CRO, their cryptocurrency token, "for the inconvenience caused". Crypto.com halted Luna trading after discovering the issue, and it remains halted as of May 13.
The issue sounds quite similar to issues that affected various defi projects around the same time. Several projects who failed to account for unexpected Luna price data coming from blockchain oracles including Chainlink suffered major attacks.
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