The latest crypto drama unfurling within the space, is the shutdown of the crypto exchange QuadrigaCX, the subsequent loss of $190 million in user funds following the death of its founder, and now the fairly concrete allegations of an exit scam…
In dribs and drabs the possible failings, drama or perhaps calculated malfeasance from the Canadian crypto exchange, QuadrigaCX, have been emerging and spreading throughout the crypto community.
The story so far…
First, there was the news that at the end of last month - following exchange downtime - that the founder of QuadrigaCX, Gerry Cotton, had sadly passed away; this was followed by the next day by the revelation that over $190 Million worth of crypto had vanished, apparently thanks to the poor storage management. The only person who had access to the funds - Mr. Cotton - was now dead. This caused hubbub of confusion, and led many on social media cry: ‘exit scam’.
And as it turns out, the conspiratorially minded among us may have it right; it was noted that transactions were being made from the companies supposedly inaccessible cold wallets…
The community reacts
Over the past few days, the social media circles of crypto have honed in on the aforementioned fiasco, offering opinions on what could have been done to avoid this catastrophe and positing perspectives on what may have occurred.
Refraining from accusations of an exit scam, Meltem Demirors, an executive at CoinShares fixated upon the issue of crypto storage management, calling for reform:
1/ beyond horrifying. canada's largest exchange @QuadrigaCoinEx— Meltem Demirors (@Melt_Dem) February 1, 2019
- founder dies suddenly
- no one has private keys to wallets
- fiat balances inaccessible
operational security and continuity planning is ESSENTIAL - for both a business *and* an individualhttps://t.co/lDFNBZtq7o
CEO of Binance, CZ, offered his opinion on exchange safety; allaying the fears of his users, and adding that he himself was in good health:
That's sad. There are many solutions to split private keys or signing to achieve 3/5, 5/7 etc. Never neglect security.— CZ Binance (@cz_binance) February 2, 2019
Also, never have CEO carry private keys. Bad on many levels.
Personally, in good health and intent to live longer and prosper. Thx for asking. Stay #safu. https://t.co/4uPQnXNN2D
Some noted that this situation may actually be a larger symptom of the current insolvency unfurling within the crypto industry, especially following the closure of contemporary companies:
QuadrigaCX is owned by https://t.co/GZF1CpRqMP, which also owns all the exchanges listed in the image.— ☩emplar Capital (@templar_capital) February 3, 2019
All these exchanges are experiencing some level of withdrawal issues, so we might be witnessing the first symptoms of insolvency in a larger collapse that's currently unfolding. pic.twitter.com/v7t8EN8jh1
Every exchange that I outlined in red uses CryptoCapital Co.— CryptoMedication (@ProofofResearch) January 30, 2019
So did QuadrigaCX.
They're all having *major problems* with withdrawals as well. pic.twitter.com/iRaiRhdGDs
Cryptocurrency Exchanges Subreddits, by Category:— Eloncarlo"USDT33kByJuly" (@CasPiancey) January 31, 2019
r/Gemini - Where's my 1099?
r/Kraken - Almost all comments deleted
r/Coinbase - Verification/Account nightmares
r/Poloniex - Wasteland
r/Bitfinex - Where tf is my money?
r/QuadrigaCX - Did we just get Goxxed?
Prominent cryptographer, Peter Todd, noted that an ‘Exit scam’ may actually be carried out by the family or employees of the exchange, rather than the founder himself:
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.— Peter Todd (@peterktodd) February 3, 2019
__Not__ saying this is happening, but need to consider all possibilities fairly in the investigation.
Jessie Powell, the CEO of the Kraken exchange alongside a myriad amateur sleuths have started looking into the situation:
We have thousands of wallet addresses known to belong to @QuadrigaCoinEx and are investigating the bizarre and, frankly, unbelievable story of the founder's death and lost keys. I'm not normally calling for subpoenas but if @rcmpgrcpolice are looking in to this, contact @krakenfx— Jesse Powell (@jespow) February 3, 2019
Probably looking at another all nighter for me, but I’m in the process of compiling a full-length report that covers the extent of QuadrigaCX’s malfeasance.— CryptoMedication (@ProofofResearch) February 2, 2019
I am accelerating the release of this report for the benefit of all affected parties.
It appears that for now, it remains a waiting game; one thing is for certain, with this level of scrutiny on the situation, the truth will certainly out.
Keep tuned to Chepicap for all the latest developments on this story and more.