The story of what’s happened Canadian cryptocurrency exchange QuadrigaCX almost sounds like a work of fiction, and while the details of the story are still unfolding, here is an overview of what we know about Quadriga so far.
Read more: Who is Gerald Cotten, the allegedly dead co-founder and CEO of Quadriga CX?
How it began
“It is with a heavy heart that we announce the sudden passing of Gerald Cotten, co-founder and CEO of QuadrigaCX. A visionary leader who transformed the lives of those around him, Gerry died due to complications with Crohn’s disease on December 9, 2018, while traveling in India, where he was opening an orphanage to provide a home and safe refuge for children in need.”
Read more: 5 conclusions of the QuadrigaCX hearing
No one is quite sure when Jennifer Robertson, Gerald Cotton’s Estate Executor made the above statement, but the consensus is that it was around January 14, 2019, since that’s when it was tweeted by Quadriga’s official Twitter account.
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The trouble begins
Then, Canada’s largest crypto exchange suddenly went offline due to unannounced system maintenance upgrades, according to a statement on the website. Sometime later, Robertson signed an affidavit in support of consumer protection. An excerpt of the affidavit reads:
“After Gerry’s death, Quadriga’s inventory of cryptocurrency has become unavailable and some of it may be lost.”
According to her, Cotton was the custodian of 26,500 Bitcoin, 11,000 Bitcoin Cash, 11,000 Bitcoin Cash SV, 25,000 Bitcoin Gold, around 430,000 ETH, and roughly 200,000 Litecoin. Some may have been kept on exchanges but at this point, it’s unclear where the private keys are.
Additionally, Cotton, who was the sole director and officer of Quadriga, was running the exchange on his encrypted laptop which no one seems to have the password to.
The story also features an encrypted USB. Apparently, an expert has been trying to gain access to both the USB and the laptop but has thus far been unsuccessful. However, perhaps as a failsafe, they said that there was an automatic method for the hot wallet to be topped up.
While the details of how this works remain unclear, Aaron Matthews, Head of Operations at Quadriga stated around January 17 that, “Hot wallets are consistently being refilled, there has been a higher demand for crypto that has caused these delays. They are going out in sequence and we are working on improving these timelines.”
The obvious question at this point is how could they top up the hot wallets without the private keys?
And that brings us to what many have been wondering, was this an elaborate exit scam? Before you roll your eyes, there may be some truth to this. The exchange had been facing fiat withdrawal issues since October last year as reports indicate that Canadian banks were refusing to provide their services to the exchange. As such, they had to rely on payment processors until seemingly, one bank suddenly froze a large portion of the exchange’s funds. This led to legal battles that apparently Cotton subsidized from his own pocket.
There was no indication of this in the statement. In fact, it was quite the opposite. The statement reassured customers that improvements were coming to the site and services, suggesting Aaron Matthews would “continue what Gerry started.”
All would have remained peaceful if it weren’t for a customer complaining on January 16 that his Bitcoin withdrawal had been pending for 24 hours. Quadriga responded with a tweet saying:
Hot wallets are consistently being refilled, there has been higher demand for crypto that has caused these delays. They are going out in sequence and we are working on improving these timelines.— QuadrigaCX (@QuadrigaCoinEx) January 16, 2019
Fast forward to January 31st. After many more complaints, Quadriga’s site goes blank with a message confirming bankruptcy proceedings had begun.
Kraken’s CEO Jesse Powell then tweeted:
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
Additionally, a further tweet by Ryan Kneer suggests that Powell has been combing through Quadriga’s transaction data and a full report of Quadriga's “malfeasance” should be published soon. Perhaps it will shed some light and provide much-needed answers to the bizarre tale.
Jesse, @ProofofResearch has spent the last 24+ hours combing through transaction data, compiling notes and screenshots. He will be publishing a full-length report that covers the extent of QuadrigaCX’s malfeasance soon.— Ryan Kneer⚡ (@ryankneer) February 3, 2019
Update February 5 - Fake person?
The latest news coming from the QuadrigaCX saga is the latest finding that Quadriga Co-founder Michael Patryn is in fact another person entirely. Reports claim that Patryn is in fact convicted criminal Omar Dhanani who has previously been convicted of fraud, for his role in operating an online marketplace for identity theft. He was released in 2007.
The findings are starting to create new conspiracy theories surrounding the entire story. Was CEO Gerald Cotton murdered? Has he performed the perfect exit scam? Is there more to this story than everyone is being led on to believe? With so much up in the air at the moment, it is hard to differentiate between facts and fiction at this point. However, something definitely smells fishy.
QuadrigaCX case Update: Co-founder Michael Patryn has been a using a fake name. His real name is Omar Dhanani who was convicted of fraud (operating an online marketplace for identity theft) in the United States and was released in 2007. Identity not SAFU pic.twitter.com/wHRDgWsci4— Boxmining (@boxmining) February 5, 2019
In the meantime, a brand new petition is appealing to the co-founder and CEO of Kraken, Jesse Powell, to buy out QuadrigaCX.