Cryptocurrency Exchange Loses Access to $190M in Coins After Founder Dies
One of the advantages often cited by cryptocurrency users is that you can do whatever you want with your money, and no one can stop you because there’s no oversight. Although, oversight can be a good thing. A Canadian crypto exchange called QuadrigaCX has announced that it lost almost about $190 million in crypto it was holding for customers. Technically, it didn’t lose the money, but it’s locked up inside wallets after the founder allegedly died without telling anyone else the password. Needless to say, customers are not pleased.
According to the company, founder Gerald Cotten, 30, died in India while doing philanthropic work in December 2018. QuadrigaCX didn’t announce the death until more than a month later out of fear it would prompt users to withdraw their crypto, and indeed that’s what happened. The website went offline during the panic, and the company didn’t reply to support emails.
When QuadrigaCX popped up again, it was in Nova Scotia Supreme Court where it filed for creditor protection. Cotten was the only person with the passcode to unlock the company’s “cold wallet” leaving almost all the exchange’s cryptocurrency inaccessible. Like many exchanges, QuadrigaCX only kept a small amount of cryptocurrency in its “hot wallet” for transfers. Most of the virtual money lives in cold wallets that are not connected to the internet, the premise being that makes it safe from hacks. Well, it’s not so safe if there’s only one person who knows how to unlock the wallets.
QuadrigaCX’s filing says Cotten had sole responsibility for handling the company’s funds, and the remaining team members have been unable to access the cold wallets in his absence. This is the “official” story, but QuadrigaCX customers are largely skeptical.
Note: 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.
__Not__ saying this is happening, but need to consider all possibilities fairly in the investigation.
— Peter Todd (@peterktodd) February 3, 2019
Almost everyone who was stung by QuadrigaCX believes Gerald Cotten is alive and well or that someone else has the keys and is trying to swipe the coins. They point to a number of inconsistencies including activity on public crypto wallets that don’t match the court filings, past descriptions of the company’s storage that include multi-signature access, and the list goes on. A popular exchange called Kraken also claims to have the addresses of many QuadrigaCX wallets that warrant investigation.
In addition to the above irregularity, there are some suspicious coincidences. Various outlets have reported that Cotten drafted a new will two weeks before his death that made no allowances for his business. Customers also allege they were able to transfer thousands of dollars in crypto to QuadrigaCX last month when it was supposedly unable to access most of its wallets, but that money is gone as well.
All we can say for certain right now is people don’t have their money, and they’re very unhappy.
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