Chaos and Confusion as QuadrigaCX Claims Escalate

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The QuadrigaCX story took another twist this weekend after a report surfaced that questioned claims that the exchange’s supposedly ‘stuck’ funds are anything but. The Canadian exchange apparently lost access to its hot wallets following the death of founder and sole director Gerald Cotton back in December. This news was only broken on January 14, 2019, and QuadrigaCX went offline some days later citing system maintenance.

On January 31, Jennifer Robertson, Cotton’s widow and executor, signed an affidavit which contained the statement: “After Gerry’s death, Quadriga’s inventory of cryptocurrency has become unavailable and some of it may be lost.” This news made it to social media, which sent the story, and the conspiracy theories, into overdrive.

Loss of Access

The facts, according to Robertson, are that QuadrigaCX owns thousands of Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and more. Some of these funds are on other exchanges, but most are in wallets with private keys known to no one but Cotton, who died without passing them on. QuadrigaCX has almost 115,000 registered users with balances that total some $53.4 million in cash and $137.6 million in crypto, which is, until someone can find the keys, apparently inaccessible.

Robertson says that while she has the laptop that contains the wallets, she does not have the encrypted password needed to access it. Professional help has not yielded any results. As such, the company has filed for creditor protection and users have been left worried that they will never get their funds back.

All May Not Be as it Seems

Conspiracy theories of a faked death began to do the rounds, with some positing a husband and wife scheme to steal the funds was underway. Theories that were stoked Sunday when blockchain researcher/analyzer Zerononcense conducted some research into the QuadrigaCX wallets and made a number of suggestions based on the data, among them:

  • QuadrigaCX was using deposits from their customers to pay other customers once they requested their withdrawal.
  • QuadrigaCX has not lost access to their Bitcoin holdings.
  • The number of Bitcoin in QuadrigaCX’s possession are substantially less than what was reported in Jennifer Robertson’s affidavit.
  • At least some of the delays in processing customer withdrawals were down to QuadrigaCX not having the funds on hand at the time.

Illustrating his points with links to numerous wallet addresses and transactions, Zerononcense summarizes that, in his opinion, “…QuadrigaCX has not been truthful with regards to their inability to access the funds needed to honor customer withdrawal requests.” Robertson and QuadrigaCX have yet to respond to the claims, but with crypto no different to the rest of the world in that it loves a good conspiracy, it’s likely that until the situation is fully resolved doubts will linger about the truth of the matter. At the very least it serves as a warning that any funds left with a third party are at an increased risk of being lost in any number of ways, even the unthinkable.