By Sidhartha Shukla and Suvashree Ghosh
The one constant in digital assets right now is fear, and its latest object is Crypto.com, an exchange whose sponsorship of sports like Formula One racing and the soccer World Cup — and having its company name atop a major LA sports venue — have popularized its brand.
The cryptocurrency company dramatically upped its profile in Los Angeles when it reportedly spent $700 million in 2021 to secure the naming rights for the now-former Staples Center for 20 years. The venue where the Lakers, Clippers, Sparks and Kings play is now known as Crypto.com Arena.
The anxiety plaguing Crypto.com stems from a question that barreled out of the disorderly collapse into bankruptcy of Sam Bankman-Fried’s crypto exchange FTX: namely, who is really safe? Such worries, well-founded or not, contributed to a $1 billion slide in Crypto.com’s native token Cronos in the past week.
The platform’s Chief Executive Officer Kris Marszalek took pains Monday to reassure customers, saying in a live-streamed briefing that its balance sheet is “very strong” and reserves cover all client assets.
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“People are depositing, people are withdrawing, people are trading,” he said. “There is pretty much normal activity, just at a heightened level.”
Hanging over the event was the revelation that the exchange in October accidentally transferred and then recovered almost $400 million of the token Ether. Earlier in the year, Crypto.com sent about A$10.5 million ($7 million) to a woman in Melbourne by mistake and is seeking to get the funds back.
Such twists are harder to stomach when the crypto sector is asking whether retail and institutional investors alike will desert in droves following the chaotic toppling of FTX and its sister trading house Alameda Research.
“Crypto.com appears to be experiencing a high volume of withdrawals, which it is handling without any issues,” said Hayden Hughes, chief executive of social-trading platform Alpha Impact. He added that in the wake of FTX many people are looking to take custody of their own funds.
No Loans
Marszalek reiterated that Crypto.com has 70 million users and less than $10 million exposure to FTX. He also said that the Cronos token is never used as collateral for loans. The coin climbed in the wake of the briefing, pushing it to a gain of about 4% in the past 24 hours as of 11:30 a.m. in London, based on CoinGecko data.
The coin is the eponymously named utility token on the Cronos blockchain. Holders of the token enjoy loyalty and usage bonuses like discounted trading fees. Its market value has plunged to less than $2 billion from a peak of more than $22 billion at the height of the digital-asset craze in November last year, according CoinGecko.
Crypto.com, like many other exchanges and investors operating in the sector, has been buffeted this year’s deep rout in virtual coins and is among companies that have reduced their workforce.
The exchange, whose app is available in a range of countries, shot to popularity after an advertising campaign fronted by Matt Damon.
Marszalek has previously said that he expects to release an audited “proof of reserves” in coming days to show that customer assets are intact. Pledges of such releases are multiplying among crypto platforms in an effort to assuage the doubts plaguing the industry.
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