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QuadrigaCX Loss of Control in Brief

Maya Mandzikasvili | Feb. 4, 2019
QuadrigaCX Loss of Control in Brief

February 4, 2019, | AtoZ Markets -The death of Gerald Cotten, a 30-year-old founder of the Canadian crypto-exchange QuadrigaCX in December last year, was a surprise for the cryptocurrency traders and turned into serious financial difficulties for the QuadrigaCX customers.

Cotten and QuadrigaCX -what is known? 

According to a report on one of the news site specializing in digital currencies, Canadian crypto exchange cannot repay most of the $ 190 million in client assets because does not have access to the cold store of the funds. The reason is that 30-year-old founder Gerald Cotten, the only person who knew the passwords to those savings storage. 

QuadrigaCX is the subsidiary of the Quadriga Fintech Solutions, Canada's largest bitcoin exchange which first publicly traded bitcoin exchange in the world. The company has installed bitcoin ATMs across major cities of Canada. As Atozmarketz reported last week the exchange platform is under maintenance, when users visit the company website, they can find post written by the firm's board of directors, explaining the current situation.

Gerald Cotten (pictured below) a Founder of Quadriga Fintech Solutions Corp has been the CEO and President at Quadriga Fintech Solutions Corp, since December 2013 and February 5, 2015, respectively. Cotten has been working with Digital Currency for approximately 11 years and in September 2014 he was certified as a Bitcoin Professional by the Cryptocurrency Certification Consortium. Cotten has been a Director of Quadriga Fintech Solutions Corp. since November 4, 2013. He had extensive experience in the Digital Currency industry, worked with numerous payment processors around the world and often spoke at financial technology conferences. According to the recent reports Cotten died of Crohn disease complications at the age of 30 while visiting India to open orphanage “ to provide a home and safe refuge for children in need.” 

The truth was revealed in the court

The company's debt to customers was reported by the CEO widow Jennifer Robertson. In her testimony under oath to the Supreme Court of Nova Scotia, she stated that QuadrigaCX owes its clients about $ 190 million in cryptocurrency and fiat. The crypto-exchange filed for the creditor protection because it claims that it cannot access the funds accumulated in the cold store. According to the news portals, the company has access only to a relatively small amount of savings assembled in the hot wallet used for transfers.

According to the affidavit, the exchange holds about 26,500 bitcoins ($ 92.3 million), 11,000 bitcoins in cash ($ 1.3 million), 11,000 bitcoins of SV ($ 707,000), 35,000 bitcoins of gold ( $ 352,000), about 200,000 litecoin ($ 6.5 million) and about 430,000 ether. (46 million dollars) totaling 147 million dollars. It is still unclear how much cryptocurrency was stored in the cold storage.

Cotten’s death is fake? 

Robertson also pointed out that Cotten "bears full responsibility of handling money and cryptocurrency," and none of the other team members can access the stored funds. According to the press, Robertson owns Cotten’s laptop but says she doesn’t know the password, and the technician hired by the firm could not hack it. Cotten's widow also says that her late husband left no business records. Although Robertson attached proof of her husband’s death to the case, some reports suggested that some of the funds could have been moved after the case was made public, and Cotten’s death was falsified. However, no evidences of the first one nor second were invariably presented. In addition, as reported by the Canadian Broadcasting Corporation's English-language online service, the government confirmed that a Canadian had died in India. Due to confidentiality laws, access to more detailed information was unfortunately limited.

Cryptos should be avoided? 

As the Canadian media outlet reports the Canadian Imperial Commercial Bank froze $ 26 million in QuadrigaCX assets in January 2018 “after detecting irregularities in processing payments”, and the Ontario High Court in 2018 concluded that “transactions worth $ 67 million “improperly transferred into the personal account of Costodian Inc, the payment processor.”

Robertson stated that the exchange “urgently needs a stay of proceedings which will allow QuadrigaCX and its contractors additional time to find whatever stores of cryptocurrency may be available and also to negotiate the bank drafts available to QuadrigaCX.”

One of the Canadian crypto-exchange clients from Calgary called such event a “tough lesson”, adding that in October 2018 he could not withdraw $ 15,000. “I would probably avoid cryptos in the future, they left us in complete darkness. I am preparing for the worst,” he concluded.

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Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.