Explained: Crypto.com’s ongoing insolvency battle

With most eyeballs on FTX’s rapid meltdown last week, fears of a Crypto.com insolvency are swirling on the periphery. Some observers fear that Crypto.com or its Cronos (CRO) blockchain system could face similar struggles or financial shortfalls in the wake of the FTX collapse.

The exchange spent exorbitant sums on marketing campaigns earlier this year, including the now-infamous “Fortune Favors the Brave” commercial and the naming rights for the LA Lakers’ basketball stadium. It also advertised nose-bleedingly high interest rates for stakers of its CRO token that earned a rebuttal by investigative and whistleblowing YouTuber Coffeezilla.

Nowadays, it’s backtracking on some of its promises of high staking rewards and perks for locking up its native token, CRO.

Observers note that the collapse of FTX was mostly due to weaknesses in its native token, FTT. With CRO already down 85% year-to-date, confidence in Crypto.com’s Cronos is nearly declining to the crisis levels that affected FTT.

Reneging on CRO-linked interest rates may have been Crypto.com’s first sign of trouble. An aggregated portfolio of on-chain assets by Nansen suggests that Crypto.com holds just over 30% bitcoin, with the remainder an assortment of altcoins with dubious value, including large stashes of Shiba Inu and Chiliz.

Crypto.com promises audited proof of reserves

The past week’s bad news has forced Crypto.com to offer reassurance about its finances. On November 9, Crypto.com promised to publish audited proof of reserves to dispel rumors of insolvency. CEO Kris Marszalek called the situation “a critical moment for the entire industry” in a tweet thread

On November 11, Crypto.com published a blog post stating that it held nearly $3 billion in reserves, including 53,024 BTC and 391,564 ETH. It also published its BTC and ETH/ERC-20 cold wallet addresses, citing transparency. This disclosure is not an audit, however. The exchange expects to publish the fully audited proof of reserves in a few weeks.

Analytics company Nansen.ai backed that initial analysis up by showing that Crypto.com’s digital asset holdings are worth over $2.8 billion.

Source : Protos

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