Crypto.com has been accused by five anonymous people of running proprietary trading and market making teams.
This report sees it as a potential culprit of conflict of interest in the crypto industry.
Crypto.com and the accusation of employing in-house teams to execute for-profit trading
According to reports in the Financial Times, it appears that crypto-exchange Crypto.com has been flagged as a potential culprit of conflict of interest in the crypto sector.
Basically, five anonymous people with direct knowledge of the matter have reported that Crypto.com runs proprietary trading and market making teams.
This would mean that the famous crypto-exchange sponsor of the World Cup in Qatar 2022 is allegedly employing its own in-house team to trade for profit.
Trading and market making activities are usually conducted by private companies separate to the exchanges, precisely to prevent manipulative trading on the crypto-exchange.
In its investigation into the issue, the Financial Times also reported on Crypto.com’s responses that appear to deny the allegations, though not entirely. Here is what it responded:
“We have an internal market maker that operates on the Crypto.com exchange and that internal market maker is treated exactly the same as third-party market makers that identically facilitate tight spreads and efficient markets on our platform. This is not a controversial practice.”
Crypto.com: “platform participants, including market makers, are treated equally”
The crypto-exchange, since its launch day in 2016, would never disclose the fact that internal traders exist.
In any case, in explaining the situation after the latest reports, Crypto.com also specified that most of its revenue comes from its app for retail traders.
This is where the crypto-exchange acts following the broker model, becoming the counterparty for transactions.
Crypto.com added:
“All companies operating in the trading industry compare volumes to their competitors. [..] Our priority is to continuously improve order book liquidity and lowering spreads as it results in a more efficient market for all participants.”
However, the five individuals who remained anonymous would contradict this claim in the report, stating that the proprietary trading desk operates on the company’s crypto-exchange as well as other venues. Not only that, the charge states that Crypto.com’s proprietary trading team’s sole purpose is to make money, and not to facilitate an exchange.
Finally, Crypto.com wanted to emphasize that participants on the platform, including market makers, are treated equally.
Crypto.com and its reaction to the US SEC crackdown
Recently, the US Securities and Exchange Commission (or SEC) indicted several crypto-exchanges not only for offering certain crypto defined as unregistered security.
There is also a charge of insider trading at stake, namely that proprietary crypto-exchange trading manipulates the trading volume of the platform. That charge by the SEC, was handed down, along with 12 other charges, to Binance.US.
In any case, Crypto.com also had its own reaction to the crackdown against crypto-exchanges initiated by the SEC in the United States.
For that reason, a few days ago, Crypto.com announced that while the name of the Los Angeles-based sports arena will remain unchanged, the company has decided to close its institutional exchanges in the United States, effective tomorrow.
This decision came after there was a lack of demand, likely due to all that is going on between the SEC and the crypto sector.
The price of CRO after allegations of conflict of interest
After the news broke yesterday, the crypto-exchange’s Cronos (CRO) didn’t experience any major movement in its price.
This means that investors do not see the report as a potential risk to the crypto-exchange.
At the time of writing, CRO is worth $0.0536, and ranks 35th in total market capitalization, which amounts to $1.36 billion.
The current price is still far from the high recorded in 2023 of $0.086, precisely on 22 February.
CRO is a crypto used to be able to pay fees for quick trading or purchases made, linked to the Crypto.com world
Matt Damon’s revelations about his ad for the crypto-exchange
In late March 2023, Matt Damon, the famous Hollywood actor who starred in Crypto.com’s commercial, “Fortune Favors the Brave,” wanted to reveal his motives for accepting the assignment.
Basically, Damon would have received as much as $1 million to fund his Water.org initiative, directly from the crypto-exchange.
A sort of “fundraiser” for the actor that would help support his foundation at a fairly complicated financial time.
The famous commercial that went live in October 2021 had come under criticism for its slogan phrase “fortune favors the brave,” referring to cryptocurrency investors. Such criticism of Crypto.com’s ad also surrounded US star Damon in his role as a motivational influencer.
Source: https://en.cryptonomist.ch/2023/06/20/crypto-com-running-illegal-trading-desks/