After the sudden death of its founder Gerry Cotten, the exchange of QuadrigaCX cryptocurrencies loses CA $ 190 million ($ 145 million) in digital assets, according to the Canadian newspaper The Globe and Mail on February 1.
In citing an application for creditor protection from the Supreme Court of Nova Scotia, the Globe and Mail declares that the firm has not been able to locate or access the funds since Cotten approved on December 9, which caused a liquidity crisis in the exchange. QuadrigaCX requested the protection of creditors in accordance with the Companies Creditors' Agreements Act (CCAA) on February 1.
The exchange only has CA $ 375,000 ($ 286,000) in cash, while it owes CA 260 million ($ 198,435,000) to its users.
The exchange kept most of its assets in offline storage systems called cold purses, which are protected by digital security keys to protect them from piracy and theft. Cotten was solely responsible for the portfolios and the corresponding keys, which the company has been trying to find after his death.
According to a report by Ernst & Young, "Quadriga could not access the cold wallets and / or discovered that the cold wallets contained minimum cryptocurrency units." The "Big Four" audit firm Ernst & Young has been appointed as an independent third party to control the procedures.
According to The Globe and Mail, Cotten worked mainly from his home computer, which is encrypted. Cotten's wife, Jennifer Robertson, said in an affidavit: "I do not know the password or the key to recovery, despite repeated and diligent searches, I could not find them written anywhere." Robertson allegedly went to the extreme hire a cybersecurity expert to "pirate Gerry's computers" in vain.
Other exchange operators told The Globe and Mail that it was unusual for a single executive to control access to funds from an exchange, since it would have made Cotten a target of kidnapping and extortion. Michael Gokturk, CEO of Einstein Exchange in Vancouver, said: "It's the equivalent of walking with millions of dollars in cash at all times."
The users of the platform, some of whom could no longer withdraw funds due to a legal battle between the exchange and a major Canadian bank, went to Twitter and Reddit after an announcement of Cotten's death. Some users asked for proof of death or an obituary.
Robertson's affidavit states that "threats have also been made against [her]." Defamatory comments have been made against [her] and have been sent via Facebook to her entire contact list. "Robertson is reportedly financing the motion of protection of creditors and a preliminary hearing has been set for February 5.
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