claimed to have lost CAD 190 million (nearly USD 145 million) worth
of cryptocurrency after the exchange lost access to its cold
(offline) storage wallets.
Reason? Unfortunately, the only person with access to the
company’s offline wallet, founder of the cryptocurrency exchange,
is dead.
Following the sudden death of Gerry Cotten, founder and
chief executive officer QuadrigaCX, the Canadian exchange this week
filed for legal protection from creditors in the Nova Scotia
Supreme Court until it locates and secures access to the lost
funds.
In a sworn affidavit filed by Cotten’s widow Jennifer Robertson
and obtained by Coindesk, Robertson said QuadrigaCX owes
its customers some CAD 260 million (USD 198 Million) in both
cryptocurrencies, including Bitcoin, Bitcoin Cash, Litecoin, and
Ethereum, as well as fiat money.
[1]
However, Robertson said the cryptocurrency exchange only has
smaller amount in a ‘hot wallet’ (USD 286,000), claiming that to
protect its users funds from hackers, majority of coins were kept
in a ‘cold wallet’—a physical device that is not connected to the
internet—by Cotten, who died of Crohn’s disease on December 9 in
Jaipur, India.
holds roughly:
- 26,500 Bitcoin (USD 92.3 million)
- 11,000 Bitcoin Cash (USD 1.3 million)
- 11,000 Bitcoin Cash SV (USD 707,000)
- 35,000 Bitcoin Gold (USD 352,000)
- 200,000 Litecoin (USD 6.5 million)
- 430,000 Ether (USD 46 million)
Cotten was the only person who had the private keys to the
wallet, according to Robertson, and no other members of the team,
including herself, has the password to decrypt it.
“For the past weeks, we have worked extensively to address our
liquidity issues, which include attempting to locate and secure our
very significant cryptocurrency reserves held in cold wallets, and
that are required to satisfy customer cryptocurrency balances on
deposit, as well as sourcing a financial institution to accept the
bank drafts that are to be transferred to us. Unfortunately, these
efforts have not been successful,” reads a message posted on the
QuadrigaCX website, which is down.
Exit Scam? Researchers Believe QuadrigaCX Never Had $100
Million
Some users and researchers have been doubtful of the exchange’s
claims, with a leading cryptocurrency researcher, claiming that
QuadrigaCX never had access to such a pool of funds and probably
lying about having cold wallet reserves, suggesting the incident
could be an exit scam.
Crypto Medication, a researcher and data analyzer, performed
in-depth blockchain analysis of the QuadrigaCX’s Bitcoin Holdings
by examining TX IDs, addresses, and coin movements, and concluded
that “there is no identifiable cold wallet reserves for
QuadrigaCX.”
“The number of bitcoins in QuadrigaCX’s possession is substantially
less than what was reported in Jennifer Robertson’s affidavit,
submitted to the Canadian courts on January 31st, 2019,” the
researcher wrote[2].
“At least some of the delays in delivering crypto withdrawals to
customers were due to the fact that QuadrigaCX simply did not have
the funds on hand at the time. In some cases, QuadrigaCX was forced
to wait for enough customer deposits to be made on the exchange
before processing crypto withdrawal requests by their customers.”
are also reporting that moving of some of the funds in question
after the case was publicized and the strange circumstances of
Cotten’s death suggest that his death is either faked or the
pretext for an exit scam by parties with access to the funds,
according to CCN[4].
“The people trying to pull off a QuadrigaCX exit scam could
actually be the family and other employees, by hiding the fact that
the cold wallet keys are known,” bitcoin analyst Peter Todd said.
“Not saying this is happening, but need to consider all
possibilities fairly in the investigation.”
for February 5 at Nova Scotia Supreme Court, with international
accounting firm Ernst and Young Inc. to be appointed as an
independent monitor.
However, if the exchange has indeed placed its cryptocurrency in
a now-inaccessible physical device, it is likely that thousands of
its users would never be able to recover their funds and
investments.
References
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