Due to the sudden death of the founder, Canada's largest bitcoin exchange was in trouble and defaulted on nearly $200 million.
In December 2018, Gerald Coton, the founder of Quadriga CX, a 30-year-old Canadian digital currency exchange, died in the complication of Inkron disease in Jaipur, Rajasthan, India.
Since the exchange’s key was only owned by Coton, the $190 million digital and fiat currency were “locked” and thousands of users who could not withdraw cash were panicked.
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Court documents show that as of January 31, 2019, approximately 115,000 users registered balances on the exchange, involving $70 million (about $53 million) in legal currency and $180 million in cryptocurrency assets ( $147 million), including approximately 26,500 BTC ($19.53 million), 11,000 BCH ($1.3 million), 11,000 bitcoin SV ($707,000), 35,000 bitcoin gold ($352,000), and nearly 200,000 LTC ($6.5 million) and About 430,000 ETH ($46 million).
But what is puzzling is that Cohen’s widow, Jennifer Robertson, did not announce the death of her husband until January 2019. Even more coincidentally, Quadonga CX is facing a serious financial problem when Coton unexpectedly dies.
So far, the exchange has not been able to recover any lost funds. The whole incident was confusing. The only certainty was that another digital currency trading platform collapsed. The victims were still the "chives" who had dreamed of making a fortune overnight.
Safety used to be the biggest selling point of QuadrigaCX
When Coton was alive, safety was once the most proud advantage of the QuadrigaCX exchange.
In 2013, when Coton and about 10 tech-savvy programmers founded QuadrigaCX at a coffee shop in Vancouver, they announced that they would develop a "safest and most convenient" trading platform to facilitate more and more bitcoins. user. Adam Goldman, president of third-party payment processor Bitbuy.ca, remembers the first time he saw Coton a few years ago. "He is a quiet, serious, ambitious planner, and very honest." .
Security is indeed a major problem facing virtual currency. In February 2014, Mt. Gox, the world's largest bitcoin exchange based in Tokyo, became a victim of hacking, losing about $400 million and is now bankrupt.
QuadrigaCX has repeatedly stated that "security is our top priority" and "bitcoin security is one of the most important issues." It is committed to "the most advanced security measures in the industry", including advanced encryption, custom operating systems and software, cold storage for most bitcoins, and collaboration with leading online security company CloudFlare. This philosophy has earned it the favor of venture capital firm VFS Securities, which focuses on Internet startup investment.
With the help of digital currency and capital, QuadrigaCX is one of Canada's two largest and best-known cryptocurrency exchanges, and the other is Coinsquare in Toronto.
As of January 31, 2019, approximately 115,000 users were registered on the QuadrigaCX exchange, and their assets were valued at $70 million, and by December 2018 they had increased to $250 million.
On the Bitcoin ATM machine launched by QuadrigaCX, users can purchase Bitcoin in less than 5 seconds, while another Bitcoin ATM in Canada needs to wait 10 minutes to two weeks to complete the transaction. More attractively, its transaction rate is 0.5%, which is much lower than 1% to 1.5% of other trading platforms.
To ensure security, anyone who wants to transfer Bitcoin needs a virtual wallet on the server. The so-called "hot wallet" is used for real-time transactions, and the cold wallet refers to the space for not storing money online and storing funds offline. Large digital asset exchanges such as Binance and Coinbase usually store most of their funds in cold storage to prevent hacking and other security breaches, but in order to ensure that the exchange can still withdraw funds in the “most unlikely situation”, it will usually Take the form of a multi-signature system.
But QuadrigaCX is a special case. The founder and CEO, Coton, is responsible for overseeing the funds, and the rest of the team has no chance to access the key. On the surface, there is nothing wrong with this approach until an accident occurs.
Cohen’s widow, Jennifer Robertson, claimed that on December 9, 2018, Coton died of Crohn’s disease complications while traveling in India, when he was planning to open an orphanage in India to provide security for children in need. Shelter.
However, since the password for the company's digital cryptocurrency is known only to Coton, after his death, QuadrigaCX owed the customer $190 million and no one can take it out. Robertson claimed that he knew nothing about the business dealings of QuadrigaCX and its affiliates. She hired a consultant to try to decrypt Coton's laptop, but after several weeks of hard work, she still couldn't find the key.
Robertson is the executor of the Cottonwood Heritage and the owner of the 43% stake in QuadrigaCX. In a document submitted to the court, she claimed that the company had no executives, directors or office space. "Most of the business is operated by Coton in his office computer."
This incident immediately sparked various speculations in the QuadrigaCX user base. Many people think that the death of Cotton is likely to be forged.
“Someone really saw the body?” one user asked on Reddit, who believed that the connection between the sudden death of Cotton and the loss of the Krabi wallet was “unbelievable”. Users also require that the address of the cold wallet be made public so that they can at least publicly confirm their account balance.
Is the death of Cottonon true?
In recent weeks, QuadrigaCX user Zou Zikai has submitted multiple withdrawal requests in a row, but only receives an automatic reply each time, which says "may take one to two weeks."
As soon as he heard the news, he immediately sounded an alarm in his mind. “I saw on Reddit, Facebook, and Twitter that they answered small questions about withdrawal time, but they didn’t answer any major questions about CEO death.” He told the CoinDesk website.
Crohn's disease is an intestinal disease of unknown cause. The clinical manifestations are flatulence, abdominal pain, diarrhea, weight loss, etc. It is a chronic disease that is prone to long-term recurrent attacks. And Coton, who is only 30 years old, has never disclosed himself to such diseases. What is most confusing is why Robertson disclosed this fact more than a month after his husband’s death, and he did not disclose any evidence except the death certificate submitted to the court. There is no obituary, even the company’s address, telephone number, and personnel. Configuration and other information are a mess.
Although Sylvain Leclerc, a spokesperson for the Canadian Department of Global Affairs, confirmed that Cottonon had died overseas and promised to help his family, he was not willing to disclose further information.
The reason why QuadrigaCX users suspect the truth of Cotton's death is largely due to the company's poor financial situation in the past year.
In January 2018, a couple of Korean couples living in the UK exchanged $100,000 to buy bitcoin, but the money was gone. The exchange does not have a public phone number, and the couple can only try to contact customer service by email. They applied for help many times, but only received emails with automatic responses, so that they thought they had been scammed. After the matter was exposed by the media, Quadriga CX quickly returned the funds to the couple's account and exempted the $2,000 fee.
QuadrigaCX customer Elvis Cavalic purchased Bitcoin through QuadrigaCX's platform. In October last year, he tried to withdraw $15,000 from his account, but failed repeatedly. "This is a very painful lesson. They completely keep me in the dark." Kavalik said that he will never touch the digital cryptocurrency again.
For several months, several users have complained on the social media platform that QuadrigaCX is difficult to extract, but it has not been resolved. By January 28, 2019, the exchange's website was completely paralyzed and maintained, causing users to become more worried.
Prior to his death, Coton blamed the Canadian Imperial Bank of Commerce (CIBC) for "unconfirmed, highly aggressive speculation" of QuadrigaCX, causing financial problems for the company. According to the Canadian "Global Mail" report, the Bank of Canada is "conspiring" to combat the encryption of digital currency business.
According to the Canadian Broadcasting Corporation (CIBC), in January 2018, the Imperial Bank of Canada found that QuadrigaCX was in violation of the transaction process, and 465 out of the $67 million in the transaction was improperly transferred to its cooperating third-party payment company, Costodian. Its owner is in the personal account of Jose Reyes. CIBC believes that it is impossible to determine who the money belongs to, so it begins the investigation and thus freezes the exchange's $26 million in assets.
For QuadrigaCX, the death of the CEO can be described as a house leak. But for users who have lost confidence in the trading platform, it is inevitable to doubt the truth behind all kinds of coincidences.
At least, coincidence means that the $200 million huge sum may be transferred or hidden, rather than simply "lost."
Can the user recover the loss?
What worries thousands of users is still happening. Robertson admitted that some of the funds in the cold wallet that was taken away by Coton could be "lost."
On January 15th, QuadrigaCX sent an email to its customers stating that it was “slow” to process the long-standing withdrawal request and set a daily withdrawal limit, “actively committed to depositing and allocating funds” .
“Although we don’t have specific measures for this situation, our goal is to solve this problem in the next two weeks. We are still committed to achieving this goal,” said QuadrigaCX’s new interim CEO, Aaron Matthews.
However, two weeks later, things changed again.
Robertson said that on January 26, the new director of QuadrigaCX decided to vote "suspend the platform." In order to repay the client's funds, the exchange is considering selling its platform, and there are already "multiple parties" to contact related matters. On February 5th, QuadrigaCX appointed Ernst & Young, a well-known accounting firm, as an independent third party to oversee its business.
She believes that the trading platform "may have significant value," but if the exchange is sued, this value may be reduced. Therefore, she filed an affidavit with the Nova Scotia Supreme Court on January 31st to save the exchange and suspend proceedings that may arise thereafter.
“Otherwise, many of the exchange’s customers may suffer further losses,” she said. But whether this move can help users recover their losses is still unknown.