Crypto.com customers worry it could follow FTX as CEO tries to reassure them everything's fine

As the crypto beingness reckons with the fallout of FTX's accelerated collapse past week and tries to fig retired wherever the contagion whitethorn caput next, questions person been swirling astir Crypto.com, a rival speech that's taken a likewise flashy attack to selling and personage endorsements.

Like FTX, which filed for bankruptcy protection connected Friday, Crypto.com is privately held, based extracurricular the U.S. and offers a scope of products for buying, selling, trading and storing crypto. The institution is headquartered successful Singapore, and CEO Kris Marszalek is based successful Hong Kong.

Crypto.com is smaller than FTX but inactive ranks among the apical 15 planetary exchanges, according to CoinGecko. FTX spooked the marketplace not conscionable by its speedy downfall but besides due to the fact that the institution was incapable to grant withdrawal requests, to the tune of billions of dollars, from users who wanted to retrieve their funds during the tally connected the firm. When it became wide that FTX didn't person the liquidity indispensable to springiness users their money, interest mounted that rivals whitethorn beryllium next.

Twitter lit up implicit the play with speculation that Crypto.com was facing problems, and crypto experts held Twitter Spaces sessions to sermon the matter. Meanwhile, revelations landed connected Sunday that, successful October, Crypto.com mistakenly sent more than 80% of its ether holdings, or astir $400 cardinal worthy of the cryptocurrency, to Gate.io, different crypto exchange. It was lone aft the transaction was exposed done nationalist blockchain information that Marszalek acknowledged the mishap.

Changpeng Zhao, CEO of rival speech Binance, fanned the flames of speculation, tweeting connected Sunday that if an speech has to determination ample amounts of crypto earlier oregon aft it demonstrates the wallet addresses, "it is simply a wide motion of problems." He added, "Stay away."

Confidence is intelligibly shaken. Crypto.com's autochthonal Cronos (CRO) token has dropped astir 40% successful the past week. The crumbling of FTX's FTT token was 1 motion of the situation that institution faced.

"I would conscionable get your wealth retired of Crypto .com now," said Adam Cochran, an capitalist successful blockchain projects and laminitis of Cinneamhain Ventures, successful a tweet implicit the weekend. "If they are afloat reserves they shouldn't attraction if you beryllium connected the sidelines for a week, but their handling of this hasn't met the bar."

Marszalek has spent the aboriginal portion of the week trying to reassure users and regulators that the concern is fine. On Monday, helium said connected YouTube that the institution had a "tremendously beardown equilibrium sheet" and that it's "business arsenic usual" with deposits, withdrawals and trading activity. He followed up with a tweet Monday evening, indicating that "the withdrawal queue is down 98% wrong the past 24 hours."

He spoke to CNBC's "Squawk Box" connected Tuesday morning, answering questions astir the authorities of his company, the marketplace and however he's otherwise positioned than FTX. He said successful the interrogation that the institution has engaged with implicit 10 regulators astir the "shocking events" surrounding FTX and however to support them from happening again.

"I recognize that close present successful the market, you've got a concern wherever everyone is done taking people's connection for anything," Marszalek said. "We focused connected demonstrating our spot and stableness done our actions."

Marszalek acknowledged that Crypto.com, similar different exchanges, has faced accrued withdrawals since the FTX quality broke, but helium said his level has since stabilized.

The skeptics tin constituent to caller history.

FTX CEO Sam Bankman-Fried said his company's assets were "fine" 2 days earlier helium was hopeless for a rescue due to the fact that of a liquidity crunch. It's a acquainted tactic. Alex Mashinsky, CEO of the present bankrupt crypto lending platform, Celsius, reassured customers of solvency days earlier halting wtihdrawals and yet filing for bankruptcy.

There are different similarities, too.

Just arsenic FTX signed a monolithic woody past twelvemonth with the NBA's Miami Heat for naming rights to the team's arena, Crypto.com agreed to wage $700 million past November to enactment its sanction and logo connected the arena that hosts the Los Angeles Lakers, among different teams successful L.A. FTX had Tom Brady and Steph Curry promoting its products. Crypto.com reeled successful Matt Damon arsenic a pitchman. Both companies bought Super Bowl ads and partnered with Formula One.

Marszalek has idiosyncratic issues from his past that whitethorn besides beryllium concerning. The Daily Beast reported successful November 2021 that Marszalek departed his past occupation "amid accusations from customers and concern partners that they had been ripped off." The Australian institution was called Ensogo, and it offered online coupons. It abruptly unopen down successful 2016.

According to documents filed with the Australian Securities Exchange, Ensogo requested its banal beryllium suspended from trading successful June 2016. The committee accepted Marszalek's resignation astatine that clip and the institution said successful a filing that it "is yet to denote the assignment of a caller CEO."

A spokesperson for Crypto.com told the Daily Beast that the committee decided to shutter Ensogo, and "there was ne'er a uncovering of wrongdoing nether Kris's leadership."

Then determination are Crypto.com's books.

Last week, Crypto.com released unaudited accusation astir its assets to blockhain analytics steadfast Nansen, who utilized the accusation to make a illustration showing wherever those assets were held. One startling revelation: Crypto.com had 20% of its assets successful wallets successful shiba inu, a alleged "meme token" that exists purely for speculation, gathering disconnected the shiba-inu canine representation of the likewise fashionable gag token, dogecoin.

Marszalek said connected Monday that this was conscionable a reflection of the assets Crypto.com customers were buying. He said successful a tweet that it was a fashionable acquisition successful 2021, on with dogecoin.

When asked by CNBC connected Tuesday if Crypto.com holds tokens connected its equilibrium sheet, Marszalek said it's a "very conservatively tally business" that holds "mostly fiat and stablecoins arsenic our root of capital."

"Yeah but however much?" asked CNBC's Becky Quick, reminding Marszalek that FTX had "billions of dollars" successful its self-created FTT token earlier it declared bankruptcy.

Marszalek declined to say.

"We're a privately held company," helium said, adding that he's not going to supply specifics "about our equilibrium sheet."

He was speedy to accidental that the institution is "very good capitalized," and reiterated comments from his YouTube league connected Monday, telling CNBC that the institution has "a precise beardown equilibrium sheet" with "zero indebtedness and zero leverage successful the business, and we are currency travel positive."

The institution has already been hammered during the crypto winter, which has pushed bitcoin and ether down by two-thirds this year. In caller months, Crypto.com reportedly slashed implicit one-quarter of its workforce. Daily trading measurement successful CRO is down to astir $365 million, according to information from Nomics. Last year, that fig was supra $4 billion.

Marszalek's main extremity present is evident: debar an FTX-type tally that could spot the institution suffer a boatload of customers. But helium besides wants to marque it abundantly wide that each the reserves are disposable to grant immoderate withdrawal requests, and that there's nary hedge money enactment taking spot with idiosyncratic deposits.

"We tally a precise elemental business," helium said. "We springiness 70 cardinal users globally entree to integer currencies and instrumentality a interest for that."

Coinbase and Binance person likewise been connected media tours trying to assuage lawsuit concerns.

Blockchain.com CEO Peter Smith expects the full mode that crypto enthusiasts clasp their investments to alteration dramatically. Smith, whose institution operates an speech and offers a crypto wallet, told CNBC past week that consumers don't request to spot 3rd parties to clasp their crypto funds, and are increasingly doing it themselves.

"You're going to spot radical displacement toward crypto connected their ain backstage keys," Smith said, adding that the institution has astir 85 cardinal users who already bash it that way. "The eventual world and coolest portion of crypto is you tin store your funds connected your ain backstage cardinal wherever you person nary counterparty exposure."

From a governance standpoint, FTX was uniquely troubled. The institution had nary board, nary concern main and nary caput of compliance, contempt raising billions of dollars, immoderate from apical firms similar Sequoia and Tiger Global, and racing to a $32 cardinal valuation.

Marszalek has a much accepted corporate structure. Crypto.com has a four-person advisory committee arsenic good arsenic a CFO, a caput of ineligible and a elder vice president of hazard and operations. That doesn't mean determination can't beryllium fraud (see: Theranos) oregon atrocious behaviour (read: WeWork), but it's astatine slightest a motion that immoderate controls are successful spot arsenic Crypto.com and different players effort to upwind a crypto wintertime that keeps getting colder.

"We consciousness rather bully astir wherever we are arsenic a institution and our operations," said Marszalek, pointing retired that the institution generated implicit $1 cardinal successful gross past twelvemonth and has topped that fig this year. "What worries maine is the interaction of this illness connected the full industry. It sets america backmost a bully mates of years successful presumption of the industry's reputation."

WATCH: CNBC's afloat interrogation with Crypto.com CEO Kris Marszalek