Cryptocurrency titan Crypto.com is waging a protracted legal battle against an Australian woman, and some of her relatives, over about $7.2 million that the company accidentally deposited in her account more than a year ago. In what sounds more like the plot of a movie than a real-life occurrence, Crypto.com is fighting--many months after the fact--to recover the funds, which have now been spread among multiple people in different countries.
To say that Crypto.com is a victim of its own errors would be an understatement. Rarely has a company of any size shot itself in the foot with such perfect aim. There are multiple lessons here for every business leader. Here's a look at just some of what Crypto.com got wrong.
Someone made a typo that started it all.
Back in May 2021, Crypto.com owed a refund of $100 Australian dollars (AUD), or about $68, to a woman named Thevamanogari Manivel. According to press reports, a Crypto.com employee inadvertently entered an account number into a field that was supposed to contain the refund amount. As a result, Crypto.com deposited almost $10.5 million AUD, or about $7.2 million, into Manivel's account.
Believe it or not, of all the mistakes that were made in this strange story, this is the smallest and the easiest to understand. People get distracted, particularly if they're doing repetitive work. Typos happen.
Nobody noticed for seven months.
The bigger problem is that it took until December 2021 for Crypto.com to discover, during a routine audit, that something had gone awry. If $7.2 million mysteriously disappeared from your company's coffers, would it take you seven months to notice that it was gone?
Crypto.com has not explained how it failed to notice the missing millions, or offered any public statement on the matter, beyond its court filings. (A company representative told Inc. that the company cannot comment on the lawsuit while it is ongoing.) Whatever the reason, it seems clear that someone wasn't paying attention when they should have been.
Those seven months gave Manivel plenty of time to decide that she wanted to keep the money, and to figure out how to do it. According to the judgment released last week, she transferred $430,000 AUD to her daughter's account, and purchased a home for $1.35 million AUD in a suburb of Melbourne. Then she transferred ownership of that home to her sister who lives in Malaysia. Australian courts have granted orders to freeze Manivel's bank accounts. They've ordered the sister to sell the house and pay interest and costs. But given the multiple jurisdictions involved, and the difficulty thus far of serving legal notice to the sister, it's unclear how all of this will play out.
Crypto.com is laying off employees. It refuses to say how many.
We don't know why someone failed to keep watch on Crypto.com's accounts. But one reason may be that whoever it was recently lost their job, or was busy trying to learn how many colleagues had lost theirs.
In June, co-founder and CEO Kris Marszalek said that the company was laying off 260 people, or 5 percent of its workforce, in a series of tweets that were oddly boastful, considering what he was announcing.
There may have been more to it than that. A couple of months later, the Verge reported that in fact, Crypto.com has laid off quite a lot more than 260 employees. Nobody knows how many because the company isn't telling anyone, not even the people who still work there. At an internal town hall this month, someone asked Marszalek how many employees had been laid off, according to the Verge. He responded that he was under no obligation to answer that question. "A number makes for a great headline, it's a great thing to gossip about," he said. But, he continued, "as co-owners of this company, you should ask yourself, 'Is it in my interest for this number to be out there?'"
Meanwhile, employees have noticed that many of their former colleagues have quietly vanished, no longer showing up at meetings, their email accounts disabled. One anonymous reviewer on Glassdoor claimed that the company had in fact laid off more than 1,000 employees--about 19 percent of its work force--and was hiding that fact. "They've removed the company directory so we can't see the numbers go down," the reviewer wrote.
Crypto.com seems to think it can control its own image.
Crypto.com is laying people off less than a year after spending $700 million to rename the former Staples Center in Los Angeles, plus hundreds of millions more on its "Fortune favors the brave" ad with Matt Damon and its Super Bowl ad with LeBron James.
It's one thing to declare that "fortune favors the brave." It's something else to spend more than $1 billion to raise your company's profile just as "crypto winter" is setting in.
Making ads that feature people with household names is a great way to draw attention to your company. But if you invite attention, you must know that you are also inviting scrutiny, along with questions you may not want to answer. Such as, "How many people are you laying off?" and, "How many of them would still have jobs if you hadn't spent all that money on a stadium name and ads with superstars?"
Asked to comment on the layoffs, particularly in the wake of its huge marketing expenses, a Crypto.com representative sent this statement to Inc.: "We announced reductions in June and since that time we have optimized our workforce to align with current external economic headwinds. We have a strong balance sheet and will continue to invest in product, engineering, and brand partnerships moving forward."
It takes more than flashy ads to build a successful company.
It's hard to know what Marszalek is thinking, or what motivated the choices Crypto.com has made. But from the outside, this all looks like a founder's ego run amok. Hiring Matt Damon to represent your company is fun. Poring over your accounts to make sure $7.2 million hasn't gone missing is tedious. But it takes that kind of boring work, and that attention to the fundamentals, to make a company successful during challenging economic times.
It also takes more empathy than Marszalek seems to have displayed. How could any CEO expect their employees to do good work while trying to guess which of their friends have lost their jobs? Given the stress these employees must all be feeling, the $7.2 million typo seems almost predictable.
Crypto.com may or may not get back the $7.2 million it accidentally gave Manivel. It definitely won't get back the $1 billion it spent naming the Crypto.com Arena and making star-studded ads. But secret layoffs are the sort of thing that can destroy employees' trust in a company and its leadership. If Crypto.com has lost that trust, that would be the biggest loss of all.