But the troubling past of CEO and cofounder Kris Marszalek is now the subject of interest. It appears that before cofounding Crypto.com, he ran an Australian company that shut down abruptly angering customers and business partners who claimed they were defrauded, according to the Daily Beast.
The company in question was called Ensogo and was a kind of Groupon, in other words it offered online coupons. But in June 2016, Ensogo abruptly closed, almost simultaneously with the departure of Marszalek, who joined Crypto.com. Sellers and buyers had not been notified of the closure of the platform.
“The Board of Ensogo Limited (E88) wishes to advise that it has accepted the resignation of CEO, Mr Kris Marszalek, effective 20 June 2016,” the company announced in a statement on June 21, 2016. “Mr Marszalek is a co-founder of E88 and has been the CEO since August 2014. The Board is yet to announce the appointment of a new CEO.”
The same day, Ensogo asked the stock market authorities to delist the company. It also told them that it planned to shut down the platform for financial reasons.
“E88 no longer intends to provide financial support to any of its subsidiaries which conduct the Company’s flash sales and marketplace businesses,” the company wrote in a regulatory filing . “The voluntary suspension is requested as the withdrawal of financial support is likely to result in the shutting down of those subsidiaries (which may include a form of voluntary administration for those subsidiaries).”
Hong Kong newspaper The Standard wrote that buyers and sellers on Ensogo’s platform were blindsided by the closure and were left with losses. Some sellers reportedly told police they had been defrauded.
Marszalek had co-founded the company, but according to Crypto.com spokesperson Matt David, he no longer had control, nor was he a member of the board that made the decision to shut down the platform, the spokesperson told TheStreet.
“Kris started Beecrazy in 2010. He built it into a profitable e-commerce business. In December 2013, the business was acquired as part of a rollup and IPO by iBuy Group, controlled by Malaysia-based Catcha Group,” David explained.
“In 2014, Kris was asked by Catcha Group to lead the turn-around of iBuy Group. The rolled-up companies took on the name Ensogo. In mid 2016, the Catcha-controlled board decided to shut down Ensogo against Kris’s wishes and advice,” David said.
He continued: “Kris did not hold a board seat and held a low single digit percentage stake in the business at the time. He resigned in response to the proposed shutdown. The shutdown angered many customers and consumers – one of the reasons Kris was opposed to the decision. There was never a finding of wrongdoing under Kris’s leadership.”
No Back Door As a crypto exchange, FTX executed orders for their clients, taking their cash and buying cryptocurrencies on their behalf. FTX acted as a custodian, holding the clients’ crypto currencies.
Crypto.com operates in the same capacity.
FTX then used its clients’ crypto assets, through its sister company’s Alameda Research trading arm, to generate cash through borrowing or market making. The cash FTX borrowed was used to bail out other crypto institutions in the summer of 2022.
At the same time, FTX was using the cryptocurrency it was issuing, FTT, as collateral on its balance sheet . This represented a significant exposure, due to the concentration risk and the volatility of FTT.
“We don’t leverage our customers’ crypto,” David said. “Our system doesn’t allow us to send money to outside accounts or to random addresses.” He added that they “back customers 1:1,’ meaning that they have not borrowed money against their customers’ assets.
The spokesperson also claimed that Crypto.com does not have a back door that would allow its executives to alter the books without the knowledge of third parties like auditors and investors.
“We don’t have a back door,” David said.
FTX’s financials showed that there was a “back door” in the books, created with “bespoke software,” according to Reuters. It was described as a way that Bankman-Fried could alter the firm’s financial records without raising any alerts.
But Bankman-Fried denied the existence of a “back door.”
Crypto promises to release an audit about its balance sheet “within 30 days.”
The company, which is based in Singapore, is privately held. As a result it doesn’t have to publish his financial records.
Marszalek lives in Hong Kong.