The Next black Swan Event?: Gate.io and Crypto.com Seem to be Fabricating Proof of Reserves

Following the demise of FTX, the crypto community is particularly worried that some crypto exchanges, such as Gate.io and Crypto.com, seem to be falsifying their proof of reserves.

The failure of Samuel Bankman-FTX Fried’s exchange pointed out the importance of proof-of-reserves for centralized exchanges. Cold storage information provided a dubious transmission of 320,000 Ether to Gate.io when verifying the flow of cash on Crypto.com.

What are Proof-of-reserves (PoR)?

Proof-of-reserves (PoR) audits are third-party independent audits intended to provide accountability and proof that a holder possesses the holdings it asserts to have on behalf of its customers. Auditors then gather account balances into a Merkle tree, which contains all client account balances.

For the second time, Crypto.com, a well-known cryptocurrency exchange, has ‘unknowingly’ transmitted millions of dollars to the wrong address.

Because of the prevailing situation of proof-of-reserve by exchanges, Kris Marszalek, the CEO of Crypto.com, posted publicly the list of addresses for the firm’s cold storage. When cryptocurrency geeks inspected, they found that the company had already sent 320k units of Ethereum tokens to another exchange, Gate.io.