Conspiracy theories swirl as Canadian crypto exchange loses $190 million

Craig Wright – Satoshi Nakamoto imposter or not – Judge not impressed

Another day, another story about a crypto exchange losing millions in customer deposits, but this story has a bizarre twist that is almost too weird to believe. QuadrigaCX, once the largest Bitcoin-focused exchanges in Canada, revealed today that it could not refund $190 million of client deposits in Bitcoin, Litecoin, Ether, and fiat currency holdings. The reason: The company cannot access its “cold storage” because only one person had the password, and that person died of mysterious circumstances in India.

To be filed under truth can be stranger than fiction, this storyline keeps getting stranger by the minute. Speculation and conspiracy theories continue to swirl in what has to be the first major crypto exchange loss that did not involve a professional hacking gang, if the present rendition is the truth. Per one report:

Further complicating the exchange’s situation is the apparent death of its founder, Gerry Cotten. Following an announcement of Cotten’s passing, some users asked for proof of death.

Others demanded further corroboration by Canadian authorities and morticians.

Accusations have been flying about, partly because Cotton died in early December, yet the family held off until January to say anything about it. According to the family’s Facebook post, Cotton, age 30, died due to “complications with Crohn’s disease on December 9, 2018 while travelling in India, where he was opening an orphanage to provide a home and safe refuge for children in need.” The contention is that an elaborate hoax has been concocted to cover up an exit scam for those with access to the funds.

The QuadrigaCX exchange is not new to controversy. The company has been embroiled in the Canadian court system, attempting to free up some $28 million that was seized by the Canadian Imperial Bank of Commerce (CIBC) a year ago. The bank claimed the funds that ostensibly belonged to five accounts of the owner of the exchange, Jose Reyes. Reyes also owned the exchange’s processor, Custodian Inc. In its preliminary ruling, the court ruled in favor of the bank, but has yet to rule on the ownership of the funds. The Accountant of the Superior Court must make that determination

The family has also sought creditor protection from the court and hired a consultant to open Cotton’s laptop, where the private keys and account records are presumably held in “cold storage”. The family’s latest missive:

For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us. Unfortunately, these efforts have not been successful.

It gets murkier still. Crypto Medication, a researcher and data analyzer responsible for a number of key exposés, claims that his analysis of the blockchain record demonstrates that QuadrigaCX never had access to even $100 million in crypto funds, much less $190 million. Medication’s research also revealed that the exchange never lost access to its Bitcoin holdings and that it has used other client deposits to pay withdrawals. This scenario is beginning to conjure up the Bernie MaDoff scandal from years back.

One industry executive is highly suspicious and has not been shy about sharing his opinion. Jerome Powell, the CEO of the Kraken exchange, believes that this case is “extremely suspect”, citing such things as prior bank fiat issues, high withdrawal activity, and a vanishing founder as just too much to swallow in one gulp. The presumption that Cotton went on an extended trip to India without securing a firm password backup process for his exchange is also difficult to accept, as well.

Lost in the shuffle of these suspicions of subterfuge are the unfortunate users of the QuadrigaCX platform. They have been unable to access, transfer, or withdraw their money for months.

Read Also: