Crypto.com, the globally recognized cryptocurrency exchange platform endorsed by Hollywood actor Matt Damon, reportedly employs internal trading teams to trade tokens for profit, raising questions about potential conflicts of interest within the digital assets industry.
Crypto.com, a top-10 crypto marketplace based in Singapore, engages in proprietary trading and market making, according to sources familiar with the matter. These functions are typically conducted by separate private entities, not by the exchanges themselves which traditionally aim to pair buyers with sellers at the most competitive and transparent prices.
These practices have already drawn scrutiny from U.S. regulators who recently levied charges against other digital asset exchanges for similar activities. Earlier this month, Binance, the world’s largest cryptocurrency exchange, faced charges from the U.S. Securities and Exchange Commission (SEC) for allegedly using a trading firm owned by CEO Changpeng Zhao for “manipulative trading that artificially inflated the platform’s trading volume”.
SEC Chair Gary Gensler compared the actions of these platforms to traditional finance, stating, “In traditional finance, we don’t see the New York Stock Exchange also operating a hedge fund, making markets.”
Since its launch in 2016, Crypto.com’s internal trading operations have remained largely under the radar. Sources revealed that executives from Crypto.com provided “absolutely dramatic sworn statements” to external trading houses affirming the platform’s non-involvement in trading. They also noted that employees were instructed to deny the existence of an internal market-making operation.
Crypto.com, however, has refuted the claims that its employees were asked to deceive other market participants. The company confirmed the presence of an internal market maker operating on the Crypto.com exchange, adding that this function is treated identically to third-party market makers that help maintain tight spreads and efficient markets on the platform.
In their defense, Crypto.com stated, “This is not a controversial practice.” They further explained that the majority of the company’s revenues are derived from their app for retail traders, where Crypto.com acts as the counterparty for transactions. The platform’s trading team ensures risk neutrality by hedging these positions across several venues, including the Crypto.com exchange.
The proprietary trading desk trades on both the company’s own exchange and other platforms. It is primarily focused on profit-making and not exchange facilitation, according to those familiar with the company’s practices.
Additionally, Crypto.com’s market-making desk aims to increase liquidity on the platform. The company emphasizes that all participants, including market makers, are treated equally on the platform. They also state that the company does not rely on proprietary trading as a revenue source.
Crypto.com, co-founded by current CEO Kris Marszalek and CFO Rafael Melo, has processed $35 billion in spot crypto and $21 billion in crypto derivatives transactions this year, according to CCData.
The exchange’s profile has risen dramatically over recent years through numerous high-profile sponsorships and sports deals. Crypto.com gained extensive visibility from an advertisement featuring Oscar-winning actor Matt Damon aired during the last Super Bowl. The company’s logo has also featured at football stadiums during the Qatar World Cup and Formula One racing circuits. Further, Crypto.com has established a multiyear partnership with basketball superstar LeBron James and secured 20-year naming rights to a major sports arena in Los Angeles.
In light of recent enforcement actions by the SEC, Crypto.com announced that it would cease operations for institutional U.S. traders from June 21, citing limited demand in the current market landscape.