Guy Had Sole Access to $190 Million Worth of Customers’ Crypto. Then He Died
In the risky world of cryptocurrency, “sorry for your loss” has a very special meaning. In the case of Canadian crypto-exchange QuadrigaCX, it’s become a rather harsh double entendre.
The exchange’s founder, 30-year-old Gerald Cotten, died suddenly in December 2018. According to a Jan. 31 affidavit filed by his widow Jennifer Robertson and dug up by Coindesk, it also just so happens that Cotten had sole access to most of the exchange’s $190 million worth of crypto held in cold storage.
Or, rather, what looks to be the exchange’s customers’ $190 million worth of crypto. And no one appears to be able to access it. Because when he died, it seems Cotten took the keys with him.
“The laptop computer from which Gerry carried out the companies’ business is encrypted and I do not know the password or recovery key,” reads the affidavit signed by his widow and Nova Scotia supreme court barrister. “Despite repeated and diligent searches, I have not been able to find them written down anywhere.”
In a message posted to its website, the exchange has copped to the fact that all is not well.
“For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us,” reads the statement from the company’s board of directors. “Unfortunately, these efforts have not been successful.”
And, if the affidavit is correct, we’re talking about a lot of cryptocurrencies. Specifically, as of Jan. 18, 26,488.59834 bitcoin, 11,378.79082 bitcoin cash, 11,149.74262 bitcoin cash SV, 35,230.42779 bitcoin gold, 199,888.408 litecoin, and 429,966.0131 ethereum.
Cryptocurrency exchanges are often hacked, and Cotten apparently took what many would consider to be a solid security precaution by keeping a significant portion of the funds held by the exchange in what is known as a cold wallet. This, as opposed to keeping all the cryptocurrency in the exchange’s hot wallet, would make it harder for a hacker to nab everything in one fell swoop. Which, is all good and fine assuming there is some sort of backup in place in case something happens to the one person with access to the said cold wallet.
Cotten looks to have not taken that precaution.
The affidavit notes that, as of Jan. 31, there were 115,000 users who had a balance on the exchange. “Total obligations due to the Affected Users approximate $250 million as of December 17, 2018.”
Understandably, QuadrigaCX’s customers have not reacted well to news of Cotten’s death and the following inability to access their money. On a subreddit dedicated to the exchange, posters are speculating on the likelihood that Cotten faked his death as part of an elaborate exit scam, and there are many calls for a lawsuit. Others, however, seem resigned to the fact that their cryptocurrency is gone.