Topic: Crypto Exchange QuadrigaCX Missing $145 Mln After Death of Founder (Read 646 times)

That's only fair she hands all that back. After all, it was all paid for illegally by using clients' funds. It doesn't even come close to the $150 million-ish that is still outstanding, though.

Given the volume of bitcoin and other crypto that "went missing" or is "inaccessible", do we believe that she doesn't own any at all? The list of assets she is keeping doesn't mention crypto at all. Given how scummy Gerald Cotten was, I'd be surprised if he hadn't stashed some away for his wife somewhere.

There was a little-discussed update in the case last week. Gerald Cotten's widow is forking over nearly $9 million of her personal assets to the bankruptcy trustee to benefit the victims. This is part of a voluntary settlement agreement that presumably allows her to dodge any liability from the QuadrigaCX fallout.

Ah and the saga (and drama) still continues. Looks like investigators hands are full right now with new evidence unearthed by the team. The only important thing that we need to know though is that if by chance they recovered and liquidated some assets be it from his widow and from people who works with Cotten, account holders should get what they deserved for. But I guess this will drag for years and might be similar to the Mt. Gox case, which up to now, the ghost is still haunting us all.

I thought I need to update this thread:

https://documentcentre.eycan.com/eycm_library/Quadriga%20Fintech%20Solutions%20Corp/English/CCAA/1.%20Monitor's%20Reports/6.%20Fifth%20Report%20of%20the%20Monitor/Fifth%20Report%20of%20the%20Monitor%20dated%20June%2019,%202019.PDF


So it means that Cotten himself was playing the money of users who deposited in QuadrigaCX to create fake volumes. The question is, are other exchanges doing this kind of malpractices. It's scary if you're going to think of it, but sadly Cotten died and leave everyone to imagine what those guys are really doing specially during the peak in 2017 and early 2018 with lots of money at their disposal.

Here is our update about the QuadrigaCX case, also published on our twitter account:
https://twitter.com/whitestream5/status/1103091778100576256

Since EY lately discovered some of QuadrigaCX cold wallet addresses, we managed to analyze some of them.
Together with insights that we already extract from QuadrigaCX hot wallets, we can shed some light on QuadrigaCX Bitcoin transactions from the last six month.

The time period we checked was since July 2018 to February 2019, the average Bitcoin price at this time frame is around $5,700.
We saw that both QuadrigaCX cold and hot wallets sent around 5,571 BTC to a suspicious intermediary wallet at this time period.
We suspect that this wallet belongs to QuadrigaCX too.

QuadrigaCX hot wallet sent to the suspicious intermediary wallet 3,432 BTC, which is around $19,500,000 US.
QuadrigaCX hot wallet:
https://www.walletexplorer.com/wallet/000009200775868e/addresses

QuadrigaCX cold wallet sent to the suspicious intermediary wallet 2,139 BTC, which is around $12,200,000 US.
QuadrigaCX cold wallet:
https://www.blockchain.com/btc/address/1JZJaDDC44DCKLnezDsbW43Zf8LspCKBYP

The suspicious intermediary wallet:
https://www.walletexplorer.com/wallet/006daa655b240256/addresses

The suspicious wallet has interactions with more Bitcoin exchanges and not just from QuadrigaCX, but most of his incomes are from QuadrigaCX.
The suspicious wallet sent most of his funds to two Chinese exchanges, Huobi and Binance.

Around 1,176 BTC were sent to Binance, which is $6,700,000 US.
Around 5,263 BTC were sent to Huobi, which is $30,000,000 US.

Huobi wallet:
https://www.walletexplorer.com/wallet/Huobi.com-2

Binance wallet:
https://www.walletexplorer.com/wallet/0000011bd9c73aab/addresses

Thank you.
whitestream - Blockchain Intelligence
https://whitestream.io

He will be found hung in a cell and the funds will mysteriously have been moved again.

Probably worth noting that they say they've cracked the laptop's security - no mention of being able to gain access to private keys yet. They have ascertained the wallets are empty only from public blockchain records. So even if the funds were there, they wouldn't be able to reimburse the customers (yet?).

Still, this does seem like the final nail in the coffin for anybody who was still on the fence about whether or not this was a scam. Everything from the misspelled death certificate, to notarizing a will two weeks prior, to this, just screams of being a scam.

They cracked the laptops security where the cold wallets were holding customers funds but they were emptied out already.
https://markets.businessinsider.com/currencies/news/crypto-ceo-died-with-passwords-to-137-million-but-the-money-is-gone-2019-3-1028009684?fbclid=iwar3tnbhazqie1u1wcumwlgyg0shoozyskw24efzof1yxfulygjlciuke5ss
Seems it was an exit scam after all.
We will probably see a photo of him on a south asian beach taken by a drone in a couple of months.

Oh well, maybe something is fishy but I guess he is really dead, and who knows maybe he can send the private keys from after life? 

The only question now is how those account holders can get their funds back? Although  Ernst & Young entered the picture already as somewhat as a wallet custodian, it might take years though before everyone can be 'compensated'.

Millions of dollars missing? We've heard of that before. Scenes like that happen again and again. My conclusion? Something fishy is going on.

I would think they were not aware because he was living in the states and then moved to canada to do this business there.
And could easily be lost in the move from country to country.
The other affiliation with the company changes his identification several times probably using the personal information from the kyc materials they collected from the previous exchange they ran.

It's probably they're not aware of his past or just using another name to front his new business ventures. We all know criminals is like one step of the game, they know how to get away and with some people wiling to cooperate without knowing who he was, perhaps we was able to put up a new exchanges and now he pull one of the biggest exit scams in 2019.

This guy was running another exchange back in 2008 from the reports. He was co running it with another known to the authorities.
From that one he would have access to alot of other identifications to assume.
So why was he allowed to run a company with the same type of business in a foreign country?

Now a new report surfaces, and then the plot thickens. This could possibility a exit scam by Cotten himself, because if was found out that the exchange has liquidity problem. So maybe there's no cold wallet after all.


https://beincrypto.com/quadrigacx-saga-human-tragedy-or-yet-another-exit-scam/

I agree, the court was like so ... your bankrupt ... yet your not bankrupt today hmmm lets just continue.
And ya Crohns isn't typically fatal if diagnosed, had a friend with ulcerative colitis, was shitting blood almost died from blood loss since it was misdiagnosed for the longest time as a gluten allergy he got some medication and is stable now.

There is a claim his name is not really what is on the death certificate but is Omar Dhanani or something like this.
Dont know the complete details but the truth will come out with all this internet sleuthing by these randoms.

Quick, sign them up for DT.

That's what it looks like, and my gut instinct is that he was running a fractional reserve. However, we should keep in mind this theory is based on a couple days worth of internet sleuthing by random people. If a cold wallet existed, it wouldn't belong to the same WalletExplorer address cluster as the hot wallet.

The exchange's logs should be able to confirm one way or the other. The truth will come out eventually.

Even if he was healthy, he must have done it. When reports say he was the only one who knew the private keys of the wallets, is it to be supposed that he has memorized them? He must have saved the keys somewhere.

That's where multi-sig wallets come in handy, but if one man don't trust his mates in sharing the part of a the password for unlocking the cold storage, then there really is a problem. First off, this is not his personal funds that we're talking about, but the funds of many other people trading on the platform. Second, he has a chronic, lifelong disease that could severely attack him at any given moment, so why wouldn't he created some sort of a backup plan for this? Lastly, why create and sign your will 2 weeks before the incident? Seems fishy but hey, we'll never know the true story after all!

Yeah. The difference here is that this was a large (Canada's biggest) and supposedly reputable exchange, not some 2-bit unheard of altcoin/token exchange that usually exit scams.

With more details emerging, it seems more likely that this isn't incompetence regarding cold storage but rather an exit scam: https://www.ccn.com/wheres-the-missing-150-million-crypto-exchange-quadrigacxs-fiasco-gets-weirder-with-new-research

Apparently there are no cold wallets, withdrawals were being paid from deposits, and the "inaccessible" wallets have continued to move funds after the alleged "death" of the owner. It seems like this owner has been regularly siphoning off funds for himself over the past several months and years, and was essentially running a Ponzi. Also worth pointing out that since Quadriga required KYC, he could quite easily have used any of the submitted KYC details to open accounts at other exchanges to cash out.

A great example of "not your keys, not your bitcoin" and avoiding KYC requirements all rolled in to one.

When it's entities like the ICE and Fidelity and Citibank holding custody instead of lone exchange operators or Bitgo multisig, there will probably be fewer exit scams like this. However, there will still continue to be hacks and embezzlement attempts by insiders. One of these Wall Street custody solutions will eventually get compromised and that'll trigger a major controversy about the viability of Bitcoin securities and physically settled derivatives. I just wonder how big the market will be and how much will be in custody when that happens.

That's what you get when amateurs who never dealt with large amounts of funds suddenly run a multi million dollar business. It's too tempting for certain people to take a run with people's funds.

This is exactly why I believe that large scale traders and institutions don't want to deal with crypto currency exchanges, but rather wait for other institutions to set up trading desks, and I can't even blame them.

Every year we're seeing how multiple exchanges go down and the operators take a run with people's funds, or that the operators claim to have suffered from a hack, while it was an insider job....

You absolutely can.

I agree the entire thing is suspicious as hell. He signed a will 2 weeks before he died. He signed everything over to his new wife. He even made arrangements for $100,000 to be assigned to care for his two pet dogs. And we are to believe that no one at Quadriga thought it was a bad idea to have the entire cold storage depending on one man's memory? I mean, most people on here will tell you that's a stupid idea. I find it hard to believe no one at a multi-million dollar company thought this was a bad idea. But, it is completely possible to die from Crohn's disease.

The ceo of Kraken exchange is stating the addresses on his exchange belong to the QuadrigaCX exchange.
https://twitter.com/jespow/status/1091863628066770944

And on the some other sites they are showing the coins from this exchange in question are moving.

He did a fake his death because you can not die from crohns disease.
And he did a will november 27, 2018 then married and off to india to start an orphanage?
Doesnt this seem particular to anyone else who is buying a fictitious story?
They described most of this on the globe & mail shown in their article.
https://www.theglobeandmail.com/business/streetwise/article-quadriga-cant-access-190-million-following-ceos-death-court/

You're absolutely right.

I have no idea why this exchange was set up in the way that was essentially bound for this to happen, since it is terrible practice to have a non-multisig cold storage wallet that holds all the funds, which only one person has exclusive access to. That kind of set up is just waiting for disasters, and I wonder how many more exchanges are doing this.

But as you say, exchanges shouldn't be trusted as a wallet, nor should you store funds on there for longer than necessary. The facts are simple here, you don't know how their internal security is run, and you don't know when there is a risk that your funds will be frozen/suspended. Bitcoin is made to be trustless for a reason.

The exchange owner should have planned ahead for situations like this.  He probably did but no one has figured out how.
 This is another reason why keeping coins on centralized exchange is dangerous and not recommended.

I agree that this is shady and very intriguing as hell, specially the complications. We can't discount the fact that they might be pulling a exit scam as well as there are lots of questions need to be answered. I wouldn't say Mt. Gox 2.0 though. Mt. Gox case is very different because it cornered majority of the traders that time but the amount involved here is huge as well.

It's more like " a single point of failure". Trusting just one person with keys of an organization is extremely foolish, there are many cryptographic schemes, like for example multisig or Shamir's Secret Sharing, that allow to spread the trust across multiple entities and they can be set up in a way that doesn't require all of them to present their keys.


Sounds very sketchy, probably an exit scam. We haven't seen them in a while, if there were indeed $145 mln, this gotta be the biggest in the recent years.

this raises the legal question of  how can the bitcoin private keys be inherited in case of death
surely only one person holding the private keys for 145$ mil worth of coins is a security breach of big proportions
probably after some time they could be found on some of his devices or this is going to be a very very bad news for the exchange's customers
one more reason to never store your coins on an exchange

There was someone saying some of their customers held $10 million worth of fiat/crypto in their accounts on this exchange.
Anybody holding this amount is asking for something to happen to it. Cause with all the exchanges being so careless lately  (cryptopia comes to mind with the recent loss of alot of ethereum) why would anyone have their funds so vulnerable like this? It just doesnt make any common sense to do this.

Can anyone say mt.gox 2.0?

Maybe its $190 mln - and I think this will help some impatience and only profit seeking crypto users to think again to take control of their keys.

I think can we say also to their clients on QuadrigaCX exchange that condolence to their fund.

As I have noticed on the link that the issues are many people asking proof of death by Mr. Cotten that to prove of his passing.
Sounds like shady because not showing proof of that but besides they respect Mr. Cotten's wife and family because they are now in pain.

Well, we don't know the whole story but that's impossible even his own family member doesn't know or having access even access on the gadget that he used(laptop/pc) maybe there's a seed phrase their to recover the cold storage of the said exchange and back all client's funds.

Yeap. Shady as hell. Also, if I remember what I've read a few days ago, the reason why the funds are inaccessible is because only Mr Cotten has access to the private keys? Not even multisig? That's the icing on the cake right there. I'm very convinced there's something else going on here and not just them being very unprofessional with their security.

If they were planning to pull something off like this they should've at least tried to be less conspicuous.

This is kind of obvious though. If you have coins in an account make sure someone you really really trust could find the key/seed/password in case something unexpected and really bad happens.

This doesn't mean give it to them right away but if when you die they can find it easily, it goes a long way. Another thing is being sure that another person won't find it by accident because you would see as ghost as much that sucks.

Interesting lesson to be learned, luckily for me - Never heard of that exchange.

It is really a weired situation as only a single person has the access to the entire cold wallet funds, this is the problem with small exchanges and i am not sure how they will be compensating the clients, this is the risk involved when you are not having access to private keys, there must be something that has to be done to over come these situations, there must a regulation on how the funds are stored in exchanges and who have access to these funds to overcome these situations.

Hmmmm.....


sauce:
https://www.reddit.com/r/QuadrigaCX/comments/amaqyo/we_need_to_sue_geralds_estate_directly/

i think that is what we can call a good example of "centralized point of failure" .


there is no perfect solution. even using multi signature has flaws. for example who are you going to trust with the keys? what will you do if they try to work together and scam you. or what if enough number of them passed away that you could not again have access to the funds like a 4 of 5 key and 2 of them die!

Another reason why people should always control their private keys and why decentralization is the way to go.

I doubt these funds are lost forever, to be honest. He must've given access to someone or a group of people. If he was suffering from a disease, that would've been the logical thing to do.

Worst possible scenario for traders who have funds in QuadrigaCX as the founder is dead:


https://cointelegraph.com/news/crypto-exchange-quadrigacx-missing-145-mln-after-death-of-founder

Its seems that the owner has access to funds alone. And with his death, there's no one besides him that can unlock it. I guess this is another lessons learn for crypto owners to implement multi-signature (correct me I'm if wrong), and for traders to just keep small amounts in a exchange for trading purposes only so that in a event of a hack and this time a death of the crypto exchange founder itself would not put your funds at risk.