By CCN Markets: Gerald Cotten, the CEO of the Canadian crypto exchange QuadrigaCX whose death is the reason for $ 190 million of missing funds and a bankrupt company, had transferred user funds to his personal accounts to use them as security for margin trading, a report by Ernst & Young revealed. After Cotten had died, QuadrigaCX went offline as the company’s CEO had exclusive access to the wallets where the exchange’s funds were held. In April, the Canadian cryptocurrency exchange declared bankruptcy. The Nova Scotia Supreme Court granted Quadriga protection from their creditors, and Ernst & Young was hired to
The U.S. Federal Bureau of Investigation (FBI) has questions in its ongoing investigation into the mysterious $ 190 million collapse of Canadian crypto exchange QuadrigaCX, so it’s turning to previous customers of the exchange for answers.
Yesterday, the agency posted a questionnaire on its website requesting responses from QuadrigaCX victims. In cooperation with various departments of the U.S. government, the FBI opened a probe into QuadrigaCX in March amidst swirling legal troubles.
“… responses are voluntary but would be useful in the federal investigation and to identify you as a potential victim,” the questionnaire reads. “Based on the responses provided, you may be contacted by the FBI and asked to provide additional information.”
QuadrigaCX monitor Ernst & Young suspects that the beleaguered exchange’s late CEO, Gerald Cotten, may have been financing personal expenditures with company funds, and it is now recommending that the assets in Cotten’s estate be placed under a preservation order.
In January, the exchange announced that it was insolvent, owing clients roughly $ 250 million CAD, after Cotten died of septic shock while honeymooning with his wife, Jennifer Robertson, in Jaipur, India. Since Cotten’s death, the exchange filed for creditor protections in the Nova Scotia court system and the court has appointed a dual counsel in Miller Thompson and Cox & Palmer to represent clients who lost money to the exchange.
As anxiety grows around every new twist and turn in the ongoing QuadrigaCX drama, along with extensive QuadrigaCX media coverage, Canada’s mainstream media has been calling on the government to bring in better oversight and regulation of cryptocurrency businesses, especially cryptocurrency exchanges.
In response to these calls for more regulation and calls from some crypto businesses for more regulatory clarity, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) released a discussion paper on March 14, 2019, with a “New Proposed Platform Framework” that would aim to specifically tailor regulations to the special risks posed by cryptocurrency exchanges.
Quadrigacx co-founder Michael Patryn is actually a convicted criminal who went by the name Omar Dhanani, a Bloomberg report alleges. Dhanani has been previously convicted of identity theft linked to bank and credit card fraud and sentenced to 18 months in a U.S. federal prison. He was later deported to Canada.
A Man of Many Faces
While Dhanani, now known as Patryn, refused to comment on the matter, Bloomberg claims to have obtained records that confirm the man’s criminal past and his changing of names twice, in 2003 and 2008. Patryn co-founded troubled Canadian exchange Quadrigacx with the late Gerald Cotten in 2013.
As QuadrigaCX’s legal counsel descends on the courtroom in Halifax, Nova Scotia, for another round of legal proceedings, the court monitor’s third report on QuadrigaCX’s finances — specifically its revelation that the exchange’s cold wallets are empty — lays out some hopeful avenues for fund recovery — and some frustrating dead ends.
QuandrigaCX has been entrenched in a solvency scandal ever since its founder’s untimely death on December 8, 2018. Gerald Cotten passed away while honeymooning with his wife, Jennifer Robertson, in Jaipur, India. According to his widow and his company, he died with the sole knowledge of the exchange’s cold storage private keys and seed phrases. The exchange filed for creditor protection on February 5, 2019.
A new research report links a trail of 12 wallets holding Quadrigacx funds worth $ 90M of ethereum to Kraken, Bitfinex, and Poloniex exchanges. With Kraken confirming that it no longer holds any active Quadriga wallets, the onus is now on the other two exchanges to confirm or deny that the coins are still in their accounts.
The San Francisco crypto exchange Kraken has announced the company is offering a $ 100,000 reward in exchange for a solid lead toward finding the missing Quadrigacx coins. Kraken has explained the company wants to bring more “awareness and attention” to the case and hopefully locate some of the lost funds.
QuadrigaCX Exchange’s founder, Gerald Cotten, passed away more than two months ago, and with his death, the keys to the exchange’s cold storage allegedly went to the grave with him.
This is the story that QuadrigaCX is sticking to in the posthumous mess that has followed its founder’s death. The situation has been likened to a second Mt. Gox, with some of the biggest differences being that we don’t know whether or not QuadrigaCX is solvent and there’s no hard evidence of foul play on behalf of the exchange. But there are also more questions than answers, and lack of hard evidence or transparency in the situation (including, whether or not there are cold wallets and whether or not QuadrigaCX is being honest about not having access to them) is the exchange’s closest resemblance to Mt. Gox: no one’s completely sure of what happened and what’s going on.
In this edition of The Daily, Canadian exchange Quadrigacx has transferred its remaining crypto funds to the court appointed monitor Ernst & Young. In Germany, the federal securities regulator Bafin has authorized an STO. Also, Beam has found a new investor and Rakuten plans to integrate cryptocurrencies into its mobile app.
Quadrigacx Sends Cryptocurrency to Ernst & Young
Troubled crypto exchange Quadrigacx has transferred its cryptocurrency holdings to the court appointed monitor Ernst & Young. According to the second report issued by EY, which is dated Feb. 20, the digital assets will be held in cold storage pending further order of the court. The transfer has been authorized by the judiciary.
In a 2014 appearance on the True Bromance Podcast, Gerry Cotten, the late CEO of embattled Canadian cryptocurrency exchange Quadrigacx, made comments indicating that the exchange was storing customer funds using paper wallets. Cotten also compared losing the private keys for a bitcoin wallet to “burning cash.”
Cotten Discusses Cryptocurrency Custody During 2014 Podcast
With Gerry Cotten having supposedly comprised the sole individual tasked with managing Quadrigacx’s keys, the roughly $ 195 million in funds owed to 115,000 of the exchange’s customers has dominated the cryptocurrency news cycle in recent weeks.
Two law firms have been appointed to represent the clients of insolvent Canadian crypto exchange Quadrigacx in court. The number of affected users has been estimated at approximately 115,000 and lawyers will have to contact as many as they can. The digital asset trading platform owes them approximately $ 190 million.
Miller Thomson, Cox & Palmer to Reach Affected Users
Nova Scotia Supreme Court Justice Michael Wood issued a decision on Tuesday, Feb. 19, announcing the appointment of Toronto-based Miller Thomson and Cox & Palmer from Halifax as representatives of Quadrigacx’s clients. Both firms have extensive experience with insolvency cases, Wood said, quoted by the Canadian Press. He added that Miller Thomson has cryptocurrency-related expertise as well.
Justice Wood has appointed legal counsel to represent some 115,000 creditors in incipient legal proceedings against seemingly insolvent cryptocurrency exchange QuadrigaCX, documents published today, February 19, 2019, from the Halifax, Nova Scotia court reveal.
After postponing his decision, in a hearing on February 14, 2019, to choose one of four legal teams vying to represent affected users, Wood has given the bid to Miller Thompson and Cox & Palmer, a joint-counsel of two firms that collectively have logged “extensive insolvency experience.” Included with this experience, the firms have a useful understanding of the Canadian Creditors Arrangement Act (CCAA), a law that applies to insolvency cases of $ 5 million CAD or more. Wood was also impressed with the complementary expertise the two firms represent and the synergy they employed to exploit their expertise efficiently on behalf of their clients.
For those QuadrigaCX users who were fortunate enough to have withdrawal requests honored, some appear to have received their funds through unconventional means.
An anonymous QuadrigaCX user who corresponded with Bitcoin Magazine said that they received a bank deposit from Robertson Nova Consulting Inc. (RNC), a corporation with no listed registration in Canadian public records, on March 8, 2017. Bitcoin Magazine also reviewed a financial inquiry into the individual’s bank account deposit history to confirm that the amounts deposited on the bank statement matched the emails.
Jennifer Robertson, the widow of the late QuadrigaCX exchange CEO, appears to be liquidating and shuffling some estate assets.
When QuadrigaCX founder and CEO Gerald Cotten passed away suddenly in December of 2018 in India, he was allegedly the only person with the knowledge of the exchange’s cold storage keys. In his will, Cotten names Robertson executrix of his estate, as well as endowing her as its primary beneficiary. The exchange waited roughly a month from Cotten’s reported time of death to making his passing public, enough time for his widow to go through probate and transfer the estate’s assets to her name.
A group of lawyers from some of Canada’s top law firms convened in a court in Halifax, Nova Scotia, today to secure the right to represent creditors in the ongoing QuadrigaCX litigation. By the end of the hearing, the presiding judge wouldn’t make a decision on which firm would play counsel for QuadrigaCX’s clients, though he promised a decision within the week.
According to the latest court documents in the ongoing QuadrigaCX case, the exchange sent roughly $ 470,000 CAD (approximately $ 355, 000 USD) worth of bitcoin from a hot wallet to a cold-storage wallet on February 6, 2019.
Ernst & Young’s first report as monitor of scrutinized Canadian bitcoin exchange QuadrigaCX (QCX) complicates the story the exchange has given for its lack of access to company funds following the death of its founder and CEO, Gerald Cotten.
Troubled Canadian cryptocurrency exchange Quadrigacx may be newly armed with a 30-day stay from creditors, following the Feb. 5 bankruptcy hearing, but its late CEO’s widow, Jennifer Robertson, is on shifting ground as her affidavit is being picked apart by customers, experts and conspiracy theorists.
Cotten’s Death Births Several Conspiracy Theories
Quadrigacx, until last year the largest Canadian exchange by traded volume, gained notoriety when it filed for bankruptcy protection, claiming that its founder and chief executive officer, Gerald W. Cotten, died in India on Dec. 9 without revealing the keys to cold wallets containing CAD $ 190 million (~US $ 145 million). A Nova Scotia Supreme Court judge on Tuesday granted Quadriga’s request for creditor protection from as many as 115,000 customers.
British Columbia’s securities watchdog has said that it has no remit to regulate troubled crypto exchange QuadrigaCX.
Today, February 5, 2019, a court in Nova Scotia, Canada, granted bankruptcy protection under the Companies’ Creditors Arrangement Act (CCAA) to the embattled Vancouver-based cryptocurrency exchange QuadrigaCX. The court appointed Ernst & Young as monitors to help the exchange locate any funds it could use to reimburse users and ordered a 30-day stay of proceedings.
The exchange initially made the news on January 14, 2019, when the company announced its CEO Gerald Cotten had died in India on December 9, 2018, from complications from Crohn's disease. News website CoinDesk obtained what appears to be a copy from the Indian government of Gerald Cotten’s death certificate, although his name is misspelled.