Last month, Canadian cryptocurrency exchange QuadrigaCX found itself in an unusual situation, even by the standards of this lawless, scam-happy industry: The only person with the passwords to the exchange’s trove of cold storage funds allegedly died, taking access to customers’ money to the grave with him. Now it seems many of the digital wallets identified as potentially containing those funds are entirely empty.
While QCX’s day-to-day transfers were handled via a hot wallet, supposedly the lion’s share were stored in offline “cold” wallets (think current vs. savings accounts) that are not quite as easy to hack. Gerald Cotten, 30, was the only person with the passwords to open up these wallets before he was reported to have died “due to complications with Crohn’s disease” in India “where he was opening an orphanage to provide a home and safe refuge for children in need,” according to a post QCX made on Facebook over a month after the fact.
Ernst & Young, which is tasked with auditing QCX, found a few wrinkles while sifting through wallets associated with the defunct exchange. “Aggregate bitcoin month end balances [...] ranged from a low of nil to a peak of approximately 2,776 bitcoin,” investigators noted—just over 10 per cent of the 26,500 bitcoin currently owed to customers. These slimmer-than-expected balances were also emptied eight months before Cotton’s alleged death.
QCX had previously run afoul of regulators at Canadian Imperial Bank of Commerce, who froze around $20 million/£15.2 million in January of last year after discovering issues with its payment processing.
Currently, the “investigation into the exchange accounts is at a preliminary stage,” and it’s possible Ernst & Young have not yet discovered the mystery wallet containing all the missing funds.