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Crypto exchange that hoards $190 million has lost its password

Written by Mon 4 Feb 2019

A crypto exchange responsible for $190 million worth of funds says it can’t return the money to investors as its founder died without sharing the exchange’s cold storage key with employees

Canadian crypto exchange QuadrigaCX has been embroiled in a fierce legal battle since last year, when the Canadian Imperial Bank of Commerce (CIBC) froze five of its accounts containing a total of $28 million in assets.

Reports since then have been sketchy, but investors have since taken to various social media platforms en masse to complain that they have been unable to withdraw bitcoin or fiat.

But the saga has taken an unexpected twist after Coindesk obtained a sworn affidavit by Jennifer Robertson, widow and wife of QuadrigaCX founder Gerald Cotten, to the Nova Scotia Supreme Court.

Earlier this month QuadrigaCX announced Cotten’s death, saying he had 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.”

Now Robertson claims that the $190 million in crypto and fiat that QuadrigaCX owes cannot be repaid to investors as Cotten held “sole responsibility for handling the funds and coins.”

Although Robertson has access to Cotten’s laptop, she does not know the cold storage password and a technical expert she recruited has been unable to break the encryption.

In total Robertson claims QuadrigaCX has lost access to 26,500 BTC, 11,000 Bitcoin Cash, 11,000 Bitcoin SV, 35,000 Bitcoin Gold, 200,000 Litecoin, and 430,000 Ethereum.

Something’s not quite right

A number of commentators have pointed out that the story sounds more like a Hollywood film plot than reality, sparking a full-blown decentralised investigation in classic crypto-style, with users meticulously tracking transactions made by QuadrigaCX ran wallets to see if Robertson’s claims stand up.

Unsurprisingly, Robertson’s fanciful tale is starting to unwind, with multiple reports that crypto is being shifted out of wallets owned by the exchange — pretty impressive for a company that supposedly has lost access to its own funds. One Reddit thread has documented multiple cases of Litecoin leaving wallets ran by QuadrigaCX after its founder had purportedly died.

Another researcher has claimed that QuadrigaCX never lost access to its cold storage funds and that it has fabricated the amount of BTC residing there.

Jesse Powell, Chief Executive of Kraken weighed in on Twitter, claiming that the debacle was “extremely suspect” and questioned the authenticity of Cotten’s death certificate.

Written by Mon 4 Feb 2019

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Bitcoin Blockchain crypto cryptocurrency
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