Did QuadrigaCX lie about its back up wallets in order to liquidate?

03 Feb, 2019 | Updated: 03 Feb, 2019
by Arthur Sillers
Breaking News
Did QuadrigaCX lie about its back up wallets in order to liquidate?

Is QuadrigaCX liquidating while pretending its founder is dead? Did QuadrigaCX lie about losing access to their reserve wallets in order to make off with about $190 Million worth of crypto? Are Reddit and Twitter crypto sleuths jumping to conclusions? It really isn't clear, but the QuadrigaCX collapse has taken an interesting turn.

QuadrigaCX is certainly going through a troubling time, and now users are alleging that those in charge of the Canadian exchange have lied to its users, claiming to have lost access to their offline hardware storage wallets (cold wallets) in order to defraud customers of Millions of dollars in crypto.

The first event occurred at the end of January, when QuadrigaCX underwent unannounced downtime, which led a number of users to cry ‘exit scam.’ Following this, it became clear that not only had Gerry Cotton, the exchange’s founder died, but that in a sworn affidavit the following day, QuadrigaCX revealed that they owed somewhere close to $190 Million worth of crypto to their customers because Gerry Cotton’s death had taken with it the only access to the company’s cold storage wallets, which were on Cotton’s laptop.

Read more: CZ criticizes QuadrigaCX: Never have CEO carry around private keys

This has brought out significant criticism of QuadrigaCX’s practices, but now a more sinister suggestion has come to light, with a number of users across crypto social alleging that suspicious transactions involving the cold wallets which were supposedly inaccessible show that QuadrigaCX is attempting to liquidate, bringing the original accusations of an exit scam full circle.

According to Jesse Powell, Twitter user ProofOfResearch, and a pair of posts on Reddit by Palhallo and whereMyCryptoAt, there is evidence that previously identified cold wallets (which again, are supposed to be completely inaccessible), have been moving Litecoins out of them into ‘hot wallets’ on the exchange.

It’s not entirely clear what is happening, but this reveal has led to accusations that someone, perhaps even a not-deceased Gerry Cotton, is funneling out the funds while misleading users.

Other commentators have noted that there is no reason to believe that these transactions explicitly involve the cold storage wallets which were lost during the death of the founder. Indeed, transactions of the size involving wallets with such large balances going directly to the addresses associate with the exchange can usually be assumed to involve an exchange’s cold storage wallets, there is no direct evidence this is the case. Users have pointed out alternative explanations, like users with large balances, or QuadrigaCX renewing their hot wallet balances with other exchange’s cold storage wallet coffers.

Either way, this is a large event for crypto. If indeed QuadrigaCX has suddenly become insolvent, this would be the second biggest crypto collapse behind CoinCheck’s $NEM hack in terms of USD, according to Twitter user ProofOfResearch.

If indeed, there is some malfeasance going on, this will not be the last crypto hears of it. Crypto is full of armchair detectives, and there are a number of dedicated amateur sleuths interested in the possibility that QuadrigaCX is attempting to exit scam.

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Read more about: Litecoin (LTC)


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