The $145 million in digital assets that are allegedly trapped in encrypted cold wallet storage of QuadrigaCX crypto exchange could actually be not there.
This was asserted by analysts cited by the Wall Street Journal (WSJ) just recently.
In December of last year, the founder of major Canadian cryptocurrency exchange QuadrigaCX, Gerald Cotten, suddenly died. Cotten was said to be the sole executive that had access to the exchange’s cold wallets. Because of this development, customers have not been able to withdraw funds owed to them, and the exchange has asked for creditor protection in the court of Canada.
A filing from Ernst & Young says, “Quadriga was unable to access the cold wallets and/or discovered that the cold wallets contained minimal cryptocurrency units.” ‘Big Four’ auditing firm Ernst & Young was tapped as an independent third party to oversee the creditor protection proceedings.
Clients of the platform have grown wary of the conditions surrounding Cotten’s passing, with some asking for an obituary or proof of death. It was recently reported that Cotten filed a will 12 days before his death. Cotten allegedly signed his last will and testament in November 2018, entitling his wife as the only beneficiary and the executor of his estate.
James Edwards, a cryptocurrency expert who publishes research on a Zerononcense, evaluated the publically available transactions of the exchange, and discovered no evidence that the exchange held any of the wallets it claimed to.
“It appears that there are no identifiable cold wallet reserves for QuadrigaCX,” he purportedly wrote in a report.
Edwards said that there is evidence to imply that wallets with larger balances were once there, but those balances are very low. At the moment, the largest wallet is a hot wallet, which is utilized for transactional purposes.
Other experts and execs in the crypto sphere have also expressed their skepticism about the exchange’s financial struggles. Elementus Group CEO Max Galka said it was “extremely likely that there aren’t any cold wallets.”
The CEO of crypto exchange Kraken, Jesse Powell, also sent out a tweet on February 2 that the development was “bizarre and, frankly, unbelievable. Powell even proposed that the Royal Canadian Mounted Police contact his exchange as it has “thousands of wallet addresses known to belong to[QuadrigaCX]” that Kraken is taking a look into.