n A new report from audit firm EY outlines the assets and debts of Canadian crypto exchange QuadrigaCX and its subsidiariesn
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Does Ernst & Young’s Report on QuadrigaCX Debacle Support this Conspiracy Theory?
According to a report by the firm appointed to oversee the financial affairs of now defunct crypto exchange QuadrigaCX, the trading venue has only million of a total 0 million it owes out. The exchange shut up shop earlier this year a month after its CEO supposedly died in mysterious circumstances.
The revelation seems to lend support to a speculative theory posited by Coinbase’s Brian Armstrong in February. Armstrong said that QuadrigaCX’s CEO’s sudden death may have been used as a scapegoat for the company’s overall mismanagement of its finances.
Did QuadrigaCX Ever Have Crypto in Cold Storage?
A report dated May 1 but that appears to have been published later states that QuadrigaCX does not have the money it owes out to creditors. Ernst and Young, the court-appointed monitor and trustee in the case, has only managed to track down around million in assets of a total 0 million that is owed out by the exchange.
The report details the assets held by three different legal entities that are associated with the now-defunct trading venue. Quadriga Fintech Solutions reportedly holds 9,345 and owes 9,875,011. Whiteside Capital Corporation holds 9,345 and owes 9,875,011. Finally, 0984750 B.C. holds ,649,542 and owes 5,697,147. A further, 0,000 in a variety of crypto assets was also recovered from one of the exchange’s hot wallets.
The author of the Ernst and Young report, George Kinsman, states that poor book keeping has been an issue with compiling the figures published this week. This, coupled with the fact that the firm could not find the cryptocurrencies in cold storage that supposedly became inaccessible with the death of Quadriga’s CEO, appears to lend support to a theory posited by Brian Armstrong of Coinbase in February:
Wanted to share a summary of what we believe happened to QuadrigaCX. We did our own internal research, including some blockchain analytics, to see if we could help. Important to note that this is just our best guess. Take it as *pure speculation*, nothing more.
— Brian Armstrong (@brian_armstrong) February 21, 2019
Whilst being careful to state that he was merely speculating on possible causes of the exchanges missing funds, not making accusations, Armstrong states that the death of Cotton Gerard may have been used as a scapegoat to cover up a gaping hole in the company’s finances. This may have been caused by a technical error, detailed in a post by the exchange itself at the time, made when upgrading to a new version of Geth in 2017 and exacerbated by the crippling bear market of 2018:
“They suffered a multimillion dollar bug in June 2017 (before things went vertical)… This is when we start to see movement of funds to ‘cold storages’”
The statement from the exchange claims that although the issue ate into profits “substantially”, it would not impact the future running of the exchange.
Armstrong speculates that the damage done may have been much greater than the trading venue let on at the time and that attempts to try to “trade their way out of a hole” may have ultimately failed due to the spectacular crash in crypto prices during 2018:
“Sequence of events suggests this was a mismanagement with later attempt to cover for it.”
Armstrong goes on to state that the exchange might seized the opportunity presented by Cotton Gerard’s death to explain its financial shortcomings. Withdrawal issues cited by users of the exchange before Gerard died lend support to the theory that the exchange’s finances were already suffering before the incident that supposedly lost the missing crypto assets:
“So maybe after about a month of debate [Dec – Jan], management decided to cut losses and release a statement claiming that access to money was lost with CEO’s death?
“While this story isn’t perfect, it does seem plausible. I do want to emphasize that these are our best guesses based on the available data. As the case unfolds we might find out we were incorrect.”
Legal proceedings are ongoing with QuadrigaCX. NewsBTC will bring you more on this story as it develops.
Related Reading: Court Grants Quadriga Deadline Extension, 5M in Crypto Still in Limbo
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QuadrigaCX CEO Lost $190 Million in Crypto, Former Friend Says He Was Fearful
The untimely death of QuadrigaCX CEO Gerald Cotten has left 0 million worth of customers’ crypto funds inaccessible. Many theorized that Cotten faked his demise to disappear with the money. But according to his former friend and colleague, the late entrepreneur was not capable of taking such drastic measures.
Adam O’Brien told Global News that before his death, Cotten had mused him about being kidnapped for having access to a multimillion-dollar fortune. The Edmonton-based bitcoin entrepreneur claimed that Cotten was expecting troubles from every corner – that he was assuming that “something might happen.”
“Gerry was holding, we know, over 0 million, almost 0 million in funds,” O’Brien asserted. “That makes people do some pretty crazy things. And I think Gerry was aware of that.”
Dead Man’s Switch
Cotten’s widow Jennifer Roberston wrote in her affidavit that Cotten died of Crohn disease while taking a humanitarian trip to India’s Jaipur town. The local police issued a no objection certificate, confirming the circumstances surrounding Cotten’s demise, before sending his remains to Nova Scotia. The conspiracy theories about Cotten faking his death ended right there.
But the fact that Cotten did not pass down the passwords of wallets that held 0 million of customers’ funds with a trustworthy party raised doubts.
“I think here we do have one leg up in a dead man’s switch,” O’Brien said. “A dead man’s switch would be something that Gerry would have had to set up before he passed away.”
Crypto exchange #QuadrigaCX is facing accusations of lying about their CEO Gerald Cotton’s death to orchestrate what people believe is an exit scam from Day One. https://t.co/jEPiguUxBJ
— NEWSBTC (@newsbtc) February 6, 2019
A dead man’s switch is a computer program which transfers a human operator’s security credentials to a priorly designated receiver over non-activity for a specified period. So, for instance, the operator dies unexpectedly or fails to interact with his machine for a long time, a dead man’s switch automatically passes down the information to the next person in line, ensuring that data remains accessible to a human.
So far, investigators have unable to find out whether or not Cotten had a dead man’s switch system in place. If yes, it was necessary to find the person who might have gained access to QuadrigaCX missing millions following Cotten’s death. It was particularly stressing since one of the co-founders associated with the Canadian exchange had a criminal record in the US. Legal documents proved that the accused Omar Dhanani had changed his name to Michael Patryn to conceal his past.
Globe and Mail has found booking photos that clearly show Quadriga cofounder Michael Patryn is in fact convicted felon Omar Dhanani. https://t.co/XWLZfwcY3a
— Amy Castor (@ahcastor) March 1, 2019
No Crypto Recovery
O’Brien believed the affected 115,000 QuadrigaCX customers would not be able to recover their funds, solely because the way crypto technology worked.
“I don’t think people are going to see that money again. And the reason I don’t is [that] the way bitcoin is designed is that once the private key is gone, there’s no recovery,” O’Brien said.
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Reddit Users Claim That QuadrigaCX Bitcoin Withdrawals Came From Other Exchanges
n Bitcoin withdrawals from the QuadrigaCX cryptocurrency exchange came from other exchanges, according to some Reddit usersn
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QuadrigaCX Starts Bankruptcy Proceedings
n nn nn Its been a long and winding road with many twists and turns for the beleaguered cryptocurrency exchange QuadrigaCX and its 115,000 former users who are owed roughly 0 million.On April 8, 2019, the case reached a critical fork in the road as a court, recognizing that attempts to restructure the exchange have failed, appointed business services firm Ernst & Young as the exchanges Trustee in Bankruptcy to watch over bankruptcy proceedings. It will a
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Canadian Crypto Exchange QuadrigaCX Officially Declared Bankrupt
n Canadian cyptocurrency exchange QuadrigaCX has been officially declared bankruptn
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In Fourth Report, QuadrigaCX Court Monitor Recommends Bankruptcy Proceedings
n nn nn QuadrigaCX monitor Ernst & Young suspects that the beleaguered exchanges late CEO, Gerald Cotten, may have been financing personal expenditures with company funds, and it is now recommending that the assets in Cottens estate be placed under a preservation order.In January, the exchange announced that it was insolvent, owing clients roughly 0 million CAD, after Cotten died of septic shock while honeymooning with his wife, Jennifer Robertson, in Ja
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Former QuadrigaCX Attorney Claims Crypto Exchange Was Sent Down Path of “Lawlessness”
The story of the now defunct QuadrigaCX crypto exchange has captivated the entire cryptocurrency industry over the past couple of months, as it has been filled with absurd revelations and strange twists that seem more akin to the plot of a movie rather than a real-life occurrence.
Now, QuadrigaCX’s former regulatory attorney is speaking up about her time working for the exchange, describing the company’s descent down a path of “lawlessness” that resulted in Gerald Cotten – QuadrigaCX’s CEO and founder – terminating all employees who he considered to be “law and order” folks.
A Brief History: The QuadrigaCX Imbroglio
The fiasco surrounding QuadrgiaCX first began in late-2018 when Cotten died suddenly during a trip to India. Although the death of a CEO shouldn’t be enough reason to send an exchange into an operational tailspin, Cotten was the only person who had access to over 0 million worth of customer funds.
This immediately sent shockwaves throughout the crypto industry, and many users of the exchange were sent into a frenzy in a futile attempt to recover their lost funds. Almost immediately after news broke about the situation, a host of rumors began to surface offering strange theories regarding what actually happened to Cotten, with one popular theory claiming that the region he died in was known as a fake death certificate capital.
The lost funds and countless victims then led regulatory agencies in Canada – where the exchange was based – to begin investigating the company, which has resulted in multiple audits that have still not been able to discover the whereabouts of any of the lost funds.
With each new revelation in the case surrounding the exchange, it is growing more appearant that QuadrigaCX’s operational flaws extended far beyond Cotten being the only one with access to user’s funds, and their path to inevitable destruction appears to have begun quite a while ago.
Crypto Exchange QuadrigaCX’s Former Attorney Tells All
In a recent article published on CoinDesk, Christine Duhaime – a regulatory attorney in Canada who was hired by the exchange for a short period of time in 2015 – explained that Cotten was guiding his exchange down a precarious path long before his death.
Duhaime noted that her time at the company came to an abrupt end shortly after Cotten decided that he no longer wanted the exchange to be a listed company, which was directly proceeded by him firing all the employees that were, in his mind, “law and order” people.
“Gerald Cotten made the decision that he no longer wanted QuadrigaCX to be a listed company. On that day, he terminated the professionals that were, in his mind, the ‘law and order’ folks – the accountant, the auditor and me, the regulatory attorney,” she explained.
Furthermore, after this occurred, Duhaime explains that Cotten began running the exchange as if it has “no investors, no shareholders, no regulatory agencies and no law that applied to it – no corporate law, no securities law, no anti-money-laundering law and no contract law.”
Another interesting twist in the story came about more recently, when Duhaime’s firm found themselves the target of an extortion scheme that arose at the beginning of the ongoing creditor protection case.
“What happened was that a person demanded…that we give them privileged and confidential information of QuadrigaCX, failing which they would defame us on social media, cause harm to our firm and file a false criminal report against our law firm to law enforcement,” she said.
Although her firm did not give away any of the aforementioned information, Duhaime notes that other people with critically important information are now hesitant to come forward out of fear of also being targeted.
As the legal case and audits surrounding QuadrigaCX persist, victims of the exchange will hopefully be able to recover their lost funds, and the industry will be able to move forward, learning from the exchange’s grave mistakes.
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QuadrigaCX Would Never Have Lost Crypto Keys Had It Been in Bermuda, Says Premier
n Premier David Burt said that QuadrigaCX would never have lost its crypto wallet keys had it been registered in Bermuda, and not Canadan
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From Law to Lawlessness Bits of the Untold QuadrigaCX Story
QuadrigaCX was once a well-run exchange but changed course overnight, writes a lawyer who represented the firm early on.
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