n Co-founder of troubled QuadrigaCX exchange Michael Patryn changed his name twice in five years, with one of alleged formers identities associated with multiple crimesn
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After QuadrigaCX New Regulations for Canadian Exchanges Are in the Works
n nn nn As anxiety grows around every new twist and turn in the ongoing QuadrigaCX drama, along with extensive QuadrigaCX media coverage, Canadas mainstream media has been calling on the government to bring in better oversight and regulation of cryptocurrency businesses, especially cryptocurrency exchanges.In response to these calls for more regulation and calls from some crypto businesses for more regulatory clarity, the Canadian Securities Administrators CSA and
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QuadrigaCX Imbroglio Takes a Turn After Widow Claims CEO Mixed Personal and Company Funds
The crypto community has been sitting at the edge of their seats watching the complex and nuanced situation surrounding the now defunct QuadrigaCX exchange unfold. Recently, news broke that Big Four Auditing Firm, Ernst & Young (EY), had discovered that the exchange’s cold storage wallets were nearly entirely empty, which came as a surprise to many hopeful victims of the exchange.
Now, however, the situation has grown in complexity after the widow of QuadrigaCX’s now deceased co-founder and CEO, Gerry Cotton, claimed that he was mixing his personal funds with company funds in an effort to make customers whole during a previous legal battle with a bank.
QuadrigaCX’s Troubles Began Far Before CEO’s Death
Although the crypto community first grew aware of QuadrigaCX’s illiquidity following Cotton’s death earlier this year, a recent statement from his wife and the executor of his estate, Jennifer Robertson, elucidates that the exchange’s troubles began long before his death.
“While I had no direct knowledge of how Gerry operated the business, he told me that he had been putting his own money back into QCX to fund user withdrawals in 2018 while the CIBC money remained frozen,” Robertson explained in a recent statement to CoinDesk that was sent by law firm Stewart McKelvey.
Her statement comes just a few weeks after court-appointed auditing firm Ernst & Young discovered that the cold wallet addresses associated with the exchange were empty, which dispelled the rumor that the stem of the exchange’s problems was simply a lack of access to user’s funds.
Furthermore, as NewsBTC previously covered, an investigative report published on the Zerononcense Blog has claimed that Cotton may have been moving up to 600,000 Ethereum (ETH) from cold storage and into a plethora of exchanges.
“Based on the transaction analysis included in the report, it appears that a significant amount of Ethereum (600,000+ ETH) was transferred to these exchanges as a means of ‘storage’ during the years that QuadrigaCX was in operation and offering Ethereum on their exchange… it is very possible that QuadrigaCX, the creditors, and other entities are unaware of this discovery,” the Zerononcense Blog report explained.
Do the Exchange’s Victims Have a Chance of Recovering Their Lost Funds?
If it is true that Cotton had been transferring hundreds of thousands of ETH into accounts held at various cryptocurrency exchanges, and these funds can be tracked, then there is a possibility that the victims of QuadrigaCX’s illiquidity may be able to recover some, or all, of their lost funds.
Robertson further affirmed in her statement that her main goal is to is to give affected users the greatest chance of recovering their lost assets.
“Following my husband, Gerald (Gerry) Cotten’s sudden and unexpected death, I arranged for the CCAA process to start by providing the initial funding and agreeing to act as a director of the Companies. The goal from the outset of the CCAA proceeding was to benefit QCX and the Affected Users by giving QCX the greatest chance of recovery of its assets,” she claimed.
At the time, it still seems as though user’s best chance of recovering any funds is that the ETH Cotton reportedly transferred is still sitting, untouched, in accounts on the various exchanges.
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QuadrigaCX Prompts Regulators to Move: Will Canada Clampdown on Crypto?
The QuadrigaCX debacle that has gripped the crypto space so far this year has evidently not gone unnoticed by Canadian financial regulators. In a consultation paper, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) appealed for the input of various crypto market participants to help with a proposed regulatory framework to address investor protection in the space.
The paper seeks input on areas including custody, asset verification, price determination, and market surveillance. All comments regarding the paper must be submitted by May 15.
CSA and IIROC Seek Input on Crypto Regulatory Framework
Canadian regulators have been spurred into action following the recent QuadrigaCX case in which the CEO of a Canada-based crypto exchange supposedly died with the only access to the company’s funds in cold storage. Various twists and turns in the narrative, including allegations of “fake death mafias” and the missing crypto never being there to begin with, and those QuadrigaCX customers that have lost out due to the fiasco are still no closer to having their money returned.
Presumably in response to this (or at least accelerated by it), IIROC and the CSA published a joint consultation paper earlier today seeking members of the cryptocurrency community to comment on a range of issues that would potentially impact upon how the space is eventually regulated.
The paper goes by the catchy title of: “Joint Canadian Securities Administrators/Investment Industry Regulatory Organization of Canada Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms”. It proposes that crypto exchanges be required to be registered as marketplaces, investment dealers, or both. This will depend on the nature of assets traded at the platform, as well as other considerations.
In a summary of the paper, CSA Chair and President and CEO of the Autorité des marchés financier, Louis Morisset, is reported to have said:
“Platforms have told us that a tailored regulatory framework is welcome as they seek to build consumer confidence and expand their businesses across Canada and globally.”
The CEO and President of IIROC, Andrew J. Kriegler added:
“Platforms have told us that a tailored regulatory framework is welcome as they seek to build consumer confidence and expand their businesses across Canada and globally.”
He went on to state that it was important to adapt to technological innovation such as cryptocurrency and that regulations should be tailored to “unique business models”. Yet, maintaining investor protection was also paramount to the role of regulators.
The paper goes on to state that both the CSA and IIROC are keen to work with international regulators and welcome discourse on a variety of different approaches.
From the wording on the crypto consultation paper, despite the fact that hundreds of millions of dollars are currently in limbo thanks to the mismanagement of QuadrigaCX’s custody solution, it still seems that Canada’s lawmakers are keen to nurture the ever-growing digital industry, rather than clampdown hard on it. The kind of tailor-made regulatory approach that it details is certainly encouraging for the future of the space.
Related Reading: After QuadrigaCX Fiasco, Another Shady Bitcoin Exchange Surfaces in Canada
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After QuadrigaCX Fiasco, Another Shady Bitcoin Exchange Surfaces in Canada
A Canada-based company is luring people into investing in overly attractive bitcoin investment plans.
The Canadian securities regulators of the British Columbia Securities Commission (BCSC) today issued a warning against Canada Bitcoin Exchange Inc.
BCSC stated that the company was offering four suspicious BTC-based investment plans via its website. Each program required investors to invest a specific capital for 24-48 hours. And in return, the suspected scammer promised returns starting from 3,586 percent, which went as high as 7,985 percent.
According to information available on its website, Canada Bitcoin Exchange Inc. proposed to invest clients’ BTC across other cryptocurrencies and stocks. The flashy sales pitch read:
“Our Professional Market analysts know where to look to find the stocks that are ready to explode. our Canadian Bitcoin Exchange trader team manage your money and make maximum profit for your deposit. The Canadabitcoinexchange.net project is managed by “Canada Bitcoin Exchange” Group which staff includes Canadian traders and analysts.”
Probably a Scam
BCSC found that the Canada Bitcoin Exchange Inc. was an unregistered organization. Therefore, it didn’t have the permission or license to offer trading services, investment consultation, and securities or exchange contracts. The commission also noted that the company was seeking deposits mainly in bitcoin, which means victims could have had a little chance of recovering their invested capital.
It is not clear whether or not the Canada Bitcoin Exchange managed to dupe investors. NewsBTC searched the company’s given BTC address on Blockchain.info, which revealed no transaction history. Interestingly, the same BTC address was also available on bitcoin cash blockchain. It indicates that the owner created the BTC account before August 1, 2017.
NewsBTC searched for more information and found that the company’s founders were hiding their information. According to Who.is, the Canada Bitcoin Exchange executives had registered their domain with NameSilo, LLC, an Arizona, US-based domain registration portal. There was no other information available that could clarify who or what was backing the Canada Bitcoin Exchange Inc, except a work address that should point investigators to Vancouver’s South Tower on Cooney Road.
Canada and Bitcoin Scams
The BCSC’s warning came at a time when Canadian agencies are investigating QuadrigaCX, a now-defunct BTC exchange whose chief executive died unexpectedly with a secret of 0 million worth of clients’ crypto assets. The Supreme Court of Nova Scotia granted the exchange a 45-day extension find the missing funds. But, according to QuadrigaCX lawyers and court monitor Ernst & Young, QuadrigaCX has less probability to recover the lost crypto assets.
At the same time, independent researchers claimed that they had located .6 million worth of missing funds to third-party cryptocurrency exchanges. However, the claims are yet to be validated.
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As Court Reconvenes for QuadrigaCX, Questions Surround Empty Cold Wallets
n nn nn Update After the March 5, 2019 court hearing, Justice Wood has granted QuadrigaCX a 45-day stay on proceedings. He has also appointed Peter Wedlake, a Grant Thornton lawyer who is part of QuadrigaCXs counsel, as the companys Chief Restructuring Officer, though the judge was reluctant at first to approve the position out of cost and efficiency concerns. The court will reconvene for the next round of proceedings on April 18, 2019, while the stay extends Quad
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Is Bitcoin (BTC) Sliding in Response to QuadrigaCX Disappointment?
- Bitcoin prices down 2.2 percent
- Five of the six QuadrigaCX cold wallets are empty
- Transactional volumes drop, demand could see participation pick up to above 37k
Even with Bitcoin (BTC) liquidation, bulls have the upper hand as long as prices are trending above Feb 18 low. In that case, risk-off traders may search for entries in lower time frames and take advantage of positive fundamentals.
Bitcoin Price Analysis
Fundamentals
There is another burden that controls tags along—that of securing private keys. In centralized exchanges, wallets can be compromised—many have lost customers’ fund. Because customers have no access to the private keys of those public addresses, once lost—or controller disappears or dies with them, your coins will be gone—unless of course there are countermeasures. It’s the unfortunate case that happened at QuadrigaCX. With the passing of Cotten, 0 million of digital assets are now locked up. Worst case scenario, they are probably irrecoverable.
Of the 0 million, customers stand to lose a cumulative 26,500 Bitcoins. Since QuadrigaCX is under customer protection and Ernst & Young tasked with monitoring, Bloomberg reports that they have identified the addresses of six cold wallets.
Unfortunately, of the six, five are empty. It’s even getting thicker because the sixth “appears to have been used to receive Bitcoin from another cryptocurrency exchange account and subsequently transfer Bitcoin to the QuadrigaCX hot wallet.”
The account was the source of last month’s inadvertent transfer of Bitcoins sparking speculations that Cotten may, after all, be alive and kicking after faking his death while traveling in India.
Candlestick Arrangements
When everything is said and done, it will be easy to note that BTC/USD is consolidating. While prices are down 2.2 percent in the last day, the world’s most valuable coin is stable in the previous week. It is down 0.5 percent. That means bears have been unsuccessful in their dump down. Encouragingly, Bitcoin bulls stand a chance.
From candlestick arrangements, our previous BTC/USD trade plan is valid. Note that sellers are yet to reverse gains of Feb 18. After two weeks of lower lows, we expect a shift in momentum as BTC demand pick up reflecting increasing volumes over the course of last months.
As it is, risk-off, aggressive type of traders can buy on dips with targets at ,500. Accompanying these longs will be tight stops at Feb 18 lows of around ,750-0—our breakout level.
Technical Indicators
Like before, our analysis anchors on Feb 18 bulls where bulls are in control. As visible, volumes are shrinking, and with averages at 12k, BTC demand could help yank prices from current lows to ,500. The spring in interest should be at the back of high trading volumes exceeding Feb 18’s 37k.
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QuadrigaCX Auditor: Most of $150m in Lost Crypto Has Been Drained, What Does This Mean for Investors?
The QuadrigaCX imbroglio took a turn yesterday when Big Four Auditing Firm, Ernst & Young (EY) released its “Third Report of the Monitor” that asserts that they have identified six separate crypto wallets were used to store the exchange’s cryptocurrency.
Unfortunately for embattled QuadrigaCX investors, the wallets did not contain any of the nearly 0 million in cryptocurrency that is still missing following the death of the exchange’s CEO, and the hunt for this missing crypto will continue on.
Ernst & Young: There Have Been No Deposits into QuadrigaCX Crypto Cold Wallets Since April 2018
Aside from one inadvertent transfer into one of the wallets totaling at under 0,000, the report claims that there have been no deposits into the wallets since April of last year.
“To date, the Applicants have been unable to identify a reason why Quadriga may have stopped using the Identified Bitcoin Cold Wallets for deposits in April 2018, however, the Monitor and Management will continue to review the Quadriga database to obtain further information,” the report explained.
Importantly, besides a small fraction of cryptocurrency remaining in the addresses, there is still well over 0 million worth of customer’s crypto still missing.
Furthermore, EY noted that they have thus far been unable to discover why the six wallet addresses had stopped being used by the exchange, but that they would continue to review their data sources in order to garner more info on where the funds were being directed to.
“The Monitor has made inquiries of the Applicants as to the reason for the lack of cryptocurrency reserves in the Identified Bitcoin Cold Wallets since April 2018. To date, the Applicants have been unable to identify a reason why Quadriga may have stopped using the Identified Bitcoin Cold Wallets for deposits in April 2018, however, the Monitor and Management will continue to review the Quadriga database to obtain further information.”
Ernst & Young did not discuss whether or not they know about any existing wallet addresses outside of the six aforementioned ones, and also did not discuss whether or not there are any cold storage addresses holding cryptocurrency besides Bitcoin.
Could the Missing QuadrigaCX Funds Be Held on Various Crypto Exchanges?
Recently, a research report published on the Zerononcense Blog claimed that they have identified the wallet addresses where the exchange was keeping their Ethereum, and that there is a “strong possibility” that there may be a significant amount of ETH being held on some major cryptocurrency exchanges, including Poloniex, Kraken, and Bitfinex.
According to the report, there may be over 600,000 ETH being held in wallets on these exchanges, and that the now defunct exchange’s deceased CEO – Gerry Cotton – may have been moving the ETH to these exchanges while QuadrigaCX was operational.
“Based on the transaction analysis included in the report, it appears that a significant amount of Ethereum (600,000+ ETH) was transferred to these exchanges as a means of ‘storage’ during the years that QuadrigaCX was in operation and offering Ethereum on their exchange… it is very possible that QuadrigaCX, the creditors, and other entities are unaware of this discovery,” the Zerononcense Blog report explains.
Jesse Powell, the co-founder and CEO of Kraken, responded to the report on Twitter, explaining that none of the aforementioned funds are being stored on Kraken, and further adding that the possibility of these funds being held on exchanges is the “best hope that QCX clients have” of ever retrieving their lost funds.
“This is the best hope that QCX clients have — that Cotten was keeping client funds in other exchanges. Unfortunately, nothing at Kraken. Hopefully, others are looking. Could be accounts were created under different names so might take some real digging to find.”
This is the best hope that QCX clients have — that Cotten was keeping client funds in other exchanges. Unfortunately, nothing at Kraken. Hopefully, others are looking. Could be accounts were created under different names so might take some real digging to find.
— Jesse Powell (@jespow) March 1, 2019
Powell has been highly involved in the whole imbroglio since it first began, and Kraken just recently announced a 0k bounty for any information leading to the discovery of the missing funds.
“Kraken is giving up to 0,000 USD (fiat or crypto) as a reward for the tip(s) that best lead to the discovery of the missing 0 million US dollars. Can you help us unravel the Curious Case of Cotton’s Coins?” The exchange announced in a recent tweet.
Kraken is giving up to 0,000 USD (fiat or crypto) as a reward for the tip(s) that best lead to the discovery of the missing 0 million US dollars. Can you help us unravel the Curious Case of Cotton's Coins?https://t.co/BurmEMKVku
— Kraken Exchange (@krakenfx) February 28, 2019
The entire crypto community will continue sitting at the edge of their seats as the situation relating to the status and whereabouts of the missing funds continues to unravel, but at this time the best hope for investors affected by the situation is likely that the missing funds are scattered about on various cryptocurrency exchanges.
NewsBTC will continue to bring you the latest developments relating to the QuadrigaCX situation.
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QuadrigaCX Director Asks Court to Appoint Restructuring Officer
n The widow of the founder of insolvent Canadian crypto exchange QuadrigaCX told a Canadian court the public attention my role as director has brought is unwantedn
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Canadian Banks Wary of QuadrigaCX Assets Origins, Cite Money Laundering Concerns
n Hesitation has been shown by Canadian banks concerning the management of the assets of insolvent cryptocurrency exchange QuadrigaCXn
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