Matt Damon’s Crypto.com CEO’s Troubled Past Resurfaces
The sudden bankruptcy of FTX, one of the largest cryptocurrency exchanges in the world, caused an earthquake in the business and political circles.
The magnitude of the shock reflects the central role FTX and its founder, Sam Bankman-Fried, played in building the nascent industry to disrupt traditional financial services.
The overnight collapse of a $32 billion company in February, whose founder is considered one of the richest in the world, has put pressure on the entire crypto sector.
Investors seem to have lost faith and are now looking at every crypto company with suspicion. They wonder if they can trust the accounting presented to them and the statements of crypto executives.
“If you’re doing a background check on someone like Sam [Bankman-Fried] you won’t find anything, he was spotless, if you will, prior to this incident,” said Anthony Scaramucci, founder of alternative investment firm SkyBridge Capital at the Bloomberg New Economic Forum. in Singapore on November 15.
The day before FTX went bust, Bankman-Fried, who is still the CEO of the platform, said his empire is “just fine”.
But 24 hours later, he called rival Changpeng Zhao for help. After initially agreeing to buy FTX, Zhao came back a day later, saying he discovered that the situation was even worse than he thought when his teams started due diligence.
Retail investors are worried
“They lied. FTX lied. I think Sam lied to employees, users, shareholders, regulators around the world and all his users,” Zhao said at an event. on Twitter on Nov. 14, “So he should accept largely the fault.”
FTX insolvent, filed for Chapter 11 bankruptcy on November 11, was due to a Liquidity shortfall when customers tried to withdraw money from the platform a few days ago. The liquidity shortfall appears to be the result of its founder allegedly transferring $10 billion in client funds from FTX to its Alameda Research cryptocurrency trading platform, according to Reuters, citing The two sources “hold FTX senior positions until this week.”
Over the past few days, all eyes have been on Crypto.com, one of FTX’s major competitors. Uncertainties and questions surround this foundation, which has earned the naming rights to the Staples Center, the arena of the Los Angeles Lakers National Basketball Association.
Fearing that Crypto.com could be the next FTX, customers rushed to withdraw their crypto and coins over the weekend.
“Yes, I was skeptical from the beginning because of the CEO but if they get through this, I will definitely continue to use their services,” one crypto investor posted on social network Reddit.
Social media is full of posts from nervous retail investors.
troubled past
Cronos (CRO) is a cryptocurrency issued by Crypto.com, which has dropped 33% in the past seven days according to CoinGecko. The total drop is 93% since the all-time high on November 24, 2021. While the crypto market has lost over $2 trillion over the past year, CRO is down more than bitcoin (BTC) ), the most popular coin among digital currencies, has lost 76% from its November 2021 high.
Crypto.com spokesman Matt David told TheStreet: “Throughout the weekend, all transactions increased but the platform remained stable. He admitted that there have been unusual withdrawals but now everything is back to normal.
But the troubled past of CEO and co-founder Kris Marszalek is now a hot topic. It appears that before co-founding Crypto.com, he was running an Australian company that suddenly closed, angering customers and business partners who allege they were scammed, according to the report. Daily beast.
The company in question is called Ensogo and is a kind of Groupon, or in other words offering online coupons. But in June 2016, Ensogo abruptly closed, almost simultaneously with the departure of Marszalek, who had joined Crypto.com. Sellers and buyers have not been notified of the platform’s closure.
“The Board of Directors of Ensogo Limited (E88) would like to announce that it has accepted the resignation of Chief Executive Officer, Mr. Kris Marszalek, effective June 20, 2016,” the company said. announced in a statement on June 21, 2016. “Mr. Marszalek is a co-founder of E88 and has been CEO since August 2014. The Board of Directors has not yet announced the appointment of a new CEO.”
On the same day, Ensogo asked the stock market regulator to delist the company. It also told them that they planned to shut down the platform for financial reasons.
“E88 no longer intends to provide financial support to any of its subsidiaries conducting the Company’s flash sales and market operations,” the company wrote in a statement. regulatory records. “The voluntary suspension is requested because the withdrawal of financial support could result in the closure of those subsidiaries (which may include a form of voluntary management of those subsidiaries).”
Hong Kong Newspaper The Standard Written that buyers and sellers on Ensogo’s platform were blindsided by the closure and suffered losses. Some sellers reported to the police that they had been defrauded.
Marszalek is a co-founder of the company, but according to Crypto.com spokesman Matt David, he no longer has control, nor is he a member of the board of directors that made the decision to close. platform door, a 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 iBuy Group, by the Group. Catcha based in Malaysia controls,” David explained.
“In 2014, Kris was asked by Catcha Group to lead the complete turnaround of iBuy Group. The consolidated companies took the name Ensogo. In mid-2016, the board of directors controlled by Catcha decided to close Ensogo. against Kris’ wishes and advice,” David said.
He continued: “Kris did not hold a seat on the board and held a low single-digit stake in the business at the time. He resigned in protest at the proposed closure. The closure angered many customers and consumers – one of the reasons Kris objected to the decision. There has never been any wrongdoing under Kris’ leadership.”
No Back Door
As a crypto exchange, FTX executed orders for their clients, took their cash and bought crypto on their behalf. FTX acts as a custodian, holding the client’s cryptocurrency.
Crypto.com works with the same capabilities.
FTX then used customers’ crypto assets, through its sister company’s trading arm Alameda Research, to generate cash through borrowing or market-making. The borrowed FTX funds were used to bail out other crypto institutions in the summer of 2022.
At the same time, FTX is using the cryptocurrency they are issuing, FTT, as collateral on Accounting balance sheet. This represents a significant level of exposure, due to the risk of concentration and volatility of the FTT.
“We don’t take advantage of customer crypto,” David said. “Our system does not allow us to send funds to external accounts or to random addresses.” He added that they have “one to one customer support,” meaning they don’t borrow money against a client’s assets.
The spokesperson also stated that Crypto.com does not have a backdoor that allows its executives to change its books without the knowledge of third parties such as auditors and investors.
“We don’t have a back door,” David said.
FTX’s financial statements show there is a “back door” in the books, created with “custom software”, according to Reuters. It was described as a way in which Bankman-Fried was able to alter a company’s financial records without giving any warning.
But Bankman-Fried denies the existence of “back doors”.
Crypto promises to publish an audit of its balance sheet “within 30 days.”
The company is based in Singapore, privately owned. As a result, it does not have to publish its financial records.
Marszalek lives in Hong Kong.