Kris Marszalek, the CEO of Crypto.com, ensured his client’s funds were safe immediately after Sam Bankman Fried’s crypto empire collapsed last November.
He further reminded everyone of his company’s top priority: to be a trusted, responsible player that is fully transparent and can provide a safe and secure place for its users.
However, compliant-loose Crypto.com payment partners, stalling fiat transfers, accumulating user complaints, and the company’s lack of communication suggest otherwise.
The question is, what else is the self-proclaimed transparent company not telling us?
Payment Processor Suspended, Crypto.com Clients Left in the Dark
On January 20, 2023, the Bank of Lithuania temporarily suspended Crypto.com’s fiat payment processor Transactive Systems UAB due to its significant breaches of the Law on Prevention of Money Laundering and Terrorist Financing. The central bank froze its funds and ordered it to stop servicing clients.
The London-based company, although relatively young, has a shady past. Transactive Systems emerged from Canadian payment processor PacNet, whose four executives were charged with fraud and money laundering in 2019. The Central Bank of Lithuania fined Transactive Systems UAB 20K EUR for misreporting customer balances and its equity capital back in 2022.
As Crypto.com used Transactive for fiat payment services, all its clients’ deposits in euros were frozen after its suspension. Crypto.com remained silent.
Only two days after the central bank’s move, the platform made a vague statement on “migrating FIAT Wallet to a new provider.” It has neither explained such a decision nor warned its clients about making euro-denominated transactions through already frozen payment processor accounts.
Some of Crypto.com’s European customers did not receive any notification of the changes until January 25, when the crypto exchange first emailed them about the “completed migration.”
The latter stated that Malta-based Foris MT Limited became the contracting entity for EUR Fiat Wallet, while customers were assigned to the new IBAN for euro deposits.
Foris MT Limited is an electronic money institution (EMI) registered in Malta and run by the sole shareholder Foris MT Holdings Limited, whose two directors are Crypto.com’s co-founder and CFO Rafael de Marco e Melo and Executive Vice President Of Operations Mariana Dinkova Gospodinova.
After the transition, numerous Crypto.com exchange users reported disruptions in euro deposits and withdrawals. Some have not received a new IBAN for two weeks after Transactive System UAB services were suspended.
Those who tried to cash out complained about unusually high withdrawal fees or withdrawal limits, reaching up to multiples of the amount.
DailyCoin contacted Crypto.com for comments but hasn’t received any response from the exchange.
Another Crypto.com’s Payment Processor Has Bitfinex in Portfolio
Soon after Transactive Systems were suspended, Crypto.com users noticed another name popping up in their app when making fiat currency transfers, the OpenPayd.
Founded and headquartered in London, OpenPayd operates as a Banking as a Service (BaaS) solution provider for international businesses. According to the official website, its products and services include IBANs, e-money accounts, payment rails, and card processing.
Ten months ago, the company became a fiat payment provider for the Bitfinex cryptocurrency exchange. The controversial digital asset exchange played a main role in emptying $850 million worth of USDT reserves from its sister company Tether in 2017. Bitfinex was accordingly suspected of manipulating cryptocurrency prices and pumping the bubbles back then.
Bitfinex’s name popped up in the reports of 2019 when Polish authorities arrested Crypto Capital President Ivan Manuel Molina Lee, who was accused of being a member of an international drug cartel and being involved in money-laundering operations via the crypto exchange.
OpenPayd and Bitfinex have been collaborating for almost a year now, as seen from the official website of the digital asset exchange at the time of publishing.
OpenPayd’s founder Ozan Ozerk is a serial entrepreneur who runs several regulated and unregulated fintechs in the UK, Lithuania, and Malta.
He is one of the co-founders of now-closed UK-registered payment processor ClearSettle, according to Crunchbase, although an official UK company registry does not confirm this.
As mentioned in the court documents shared by a Twitter community, ClearSettle was once a payment processor for the medical marijuana marketplace Ease Platform.
The latter appeared at the center of the lawsuit for laundering schemes and disguised sales of “cannabis products through shell companies, false merchant codes, and payment processing companies,” including the now-defunct German payment firm Wirecard AG.
3/3 Eaze yields another familiar face ... @theFCA authorised #Emoney op & payment processor #ClearSettle (https://t.co/NLHiu1ndv0) and the world of Ozan Ozerk ... it's a small world unless you're the FCA. pic.twitter.com/3EOfjsbEmY— Ian Beckett (@ianbeckett) March 25, 2021
Once valued at $28 billion, Wirecard declared insolvency in 2020 after the payment firm was forced to admit the absence of 1.9 billion euros in its accounts, which probably never existed. Its case marked the biggest fraud scandal in Germany since WWII.
Interestingly, the OpenPayd co-founder’s potential connections is not the only time Wirecard appears in Crypto.com’s orbit.
Card Issuer Suspected of Money Laundering
The Central Bank of Lithuania, the same one that suspended the services of Transactive Systems less than a month ago, made another similar move on February 9, 2023.
Supported by the court’s permission, Lithuania’s Central Bank ordered electronic money institution (EMI) Payrnet UAB to freeze services that involve digital money transactions temporarily.
The bank suspects Payrnet UAB of severe and systematic violations of the Law on Prevention of Money Laundering and Terrorist Financing.
As the local registry shows, Payrnet UAB links its online presence to PayrNet, the subsidiary company of Railsr. Railsr is a UK-registered “embedded finance” platform offering banking-as-a-service and cards-as-a-service solutions for global businesses.
Formerly known as Railsbank, the company acquired the United Kingdom subsidiary of Wirecard in 2020.
The same year, it partnered with Crypto.com.
Kris Marszalek, CEO of Crypto.com, talks about joint card partnership programs for clients in Asia and Europe in this video.
In September 2020, Crypto.com notified its customers that Payrnet Ltd replaced Wirecard and became the new issuer of card programs in the UK and European Union.
We just notified our customers that Payrnet Limited (@railsbank) will be the new issuer of UK & EU card program, replacing Wirecard.— Crypto.com (@cryptocom) September 18, 2020
The switchover will be completed by 17 Nov 2020. Your card will remain fully operational during the switchover. There's no action required. pic.twitter.com/06v431AxuA
Since then, the company has not issued any publicly available announcement stating that it no longer cooperates with Payrnet or Railsr.
On the contrary, the September 5, 2022 document update states that Crypto.com is still in partnership with Payrnet’s Singaporean subsidiary PayrNet Pte. Ltd.
The latter issues prepaid Visa cards for Crypto.com service users. It is also named a holder of fiat currency deposited on prepaid cards or prepaid card wallets.
However, the update from last year says that PayrNet Pte. Ltd. “is not an approved holder regulated by the Monetary Authority of Singapore” and advises users to read the terms carefully.
Furthermore, sources familiar with the matter hint that Railsr has been suffering “an acute cash flow issue in the second half of 2022” and might be talking about selling the firm to Nigerian fintech Flutterwave.
DailyCoin could not detect similar documents related to Crypto.com UK or its European clients at this time.
Neither have we heard of Crypto.com informing its UK and European Union users of the Bank of Lithuania’s actions against the card issuer Payrnet since February 9, 2023.
Why You Should Care
Crypto.com presents itself as the world’s fastest and most secure crypto exchange, trusted by more than 80 million users in 90 different countries.
It generated over $1 billion in revenue over the past few years, each in 2021 and 2022. The official website says it is “a leader in compliance and security certifications.” CEO Kris Marszalek has named Crypto.com a responsible, regulated player since its inception in 2016.
However, statements and goals have not protected the company from “accidents.” Crypto.com transferred $10.5 million instead of $100 to an Australian woman in 2021, noticing its mistake only seven months after.
In 2022 it accidentally transferred $400 million worth of Ethereum (ETH) to rival crypto exchange Gate.io, blaming human error.
Digital Asset Exchange published its Proof of Reserves audit report in December 2022. The audit, conducted by Mazars Group auditors, stated that crypto exchange customers’ assets were more than 100% backed.
Find out more on crypto exchanges’ reserves:
Nine Leading Crypto Exchanges Commit to Proof of Reserve Amidst FTX’s Liquidity Crunch
Read about the future of crypto payments in business:
Is Cryptocurrency the Future for Business Payments?