After QuadrigaCX’s exchange founder died, Cryptocurrency investors were locked out of all accounts. Now the largest Canadian crypto exchange is in $190 million in debt to its customers.
The founder of the company, Gerald Cotten, died last year in December 2018 during a trip to India. Since his death, all access to their cold storage wallets have been lost. Unfortunately, the founder was the only person with the credentials needed to get into the offline wallet.
Currently about 115,000 users have accounts with the company with about 53 million in fiat and $137 million in cryptocurrency are owed to the customers. The cryptocurrencies include Bitcoin, Bitcoin Cash, Litecoin, and Ethereum.
Jennifer Robertson, Cotten’s widow, filed a sworn affidavit in the Nova Scotia Supreme Court saying that the company owned $190 million in cryptocurrency and fiat. Further, there was more crypto currency kept in the cold storage than the hot wallet. Robertson said “only minimal amount of coins” were in the hot wallet about $286,000.
A cold storage wallet is a hardware device that holds coins offline, mitigating the risk of a hack. To access the cold storage, you need to provide the correct credentials which include passwords and encrypted codes.
She further said:
“The normal procedure was that [QuadrigaCX founder and CEO Gerald Cotton] would move the majority of the coins to cold storage as a way to protect the coins from hacking or other virtual theft.”
It is important for big companies like QuadrigaCX to share information among necessary team members. In case of an unforeseen event, like Cotten’s death having critical information can keep the company running. His team members have not been able to access the wallets since.
His wife has also stated:
“The laptop computer from which Gerry carried out the Companies’ business is encrypted, and I do not know the password or recovery key. Despite repeated and diligent searches, I have not been able to find them written down anywhere”
QuadrigaCX is facing bankruptcy and trying to get a handle of this unique situation. Some researchers believe that a cold wallet may have never existed, and this is a final exit scam of the company. Either way, thousands of users have lost their funds and investments. Perhaps this is a signal for a cryptocurrency exchange companies to be held liable for their customers and a law similar to the FDIC should be created.
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