The real question over Gerry
Cotten’s death in India is can you really lose $200 million US dollars by
mislaying keys?
By LUKE THOMPSON
It has become a fact of the
modern age that trading and holding crypto-currency can be a risky business. If
traders store their holdings on exchanges, those risks are amplified because
their investments are susceptible to security breaches.
But now a much bigger problem
related to exchanges has emerged.
Earlier this week it was
reported that Gerry Cotten, the founder of Canada’s largest crypto
exchange Quadriga, had passed away and had left no information regarding the
cryptographic keys needed to access the investor accounts. The digital
coins that are stored there could be worth up to US$190 million.
According to the BBC, Cotten died
in December but the firm has only just filed for creditor protection after
failing to locate or secure its crypto-currency reserves, which the 30-year-old
CEO apparently had sole responsibility for.
According to the BCC, Quadriga
has said that Cotten died unexpectedly due to complications with Crohn’s
disease while traveling in India.
An affidavit filed in the
Supreme Court of Nova Scotia last week by Cotton’s widow confirmed that the
company holds $190 million on behalf of its customers around the world, the
majority of which was held in offline “cold storage” to mitigate the risk of
exchange hacks. These are the accounts that can only be accessed by the missing
cryptographic keys.
A Halifax judge granted
Quadriga a 30-day stay on Tuesday while the exchange continues to search for a
way to access the lost crypto. This has temporarily shielded the company from
lawsuits from clients, some of whom apparently have millions with Quadriga that
are inaccessible.
It has been estimated that
about 115,000 Quadriga account holders have personal accounts with the firm in
the form of both cash and crypto-currency.
Gerald Cotten’s widow,
Jennifer Robertson, claims to have her late husband’s laptop and USB sticks
that were used to run the business, but says without the cryptographic keys she
has no access to the devices or the locked funds.
Predictably, rumors have since
emerged that the whole thing could have been an elaborate exit scam and while a
large number of crypto sector news sites are running “show me the body” type
stories, there is also a growing body of investigative work that claims
Quadriga had always been deceptive about what actual crypto cold wallets
it had and what was stored there.
According to a lengthy,
detailed and apparently highly-technical Zerononsence
Blog report – that describes itself as an “in-depth analysis” on
Quadriga – there are a number of significant question marks regarding the
Canadian exchange’s trading practices and storage facilities.
The two key Zerononsence
report findings say it “appears that there are no identifiable cold wallet
reserves for Quadriga” and it “does not appear that Quadriga has lost access to
their Bitcoin holdings.”
By analyzing trading patterns
and wallet addresses – of which many, says the report, were deemed spurious –
the researchers have bluntly concluded that the exchange “has not been truthful
with regards to their inability to access the funds needed to honor customer
withdrawal requests.”
Quadriga did not announce the
death of its CEO until January 14 when
it announced that “it is with a heavy heart that we announce the sudden passing
of Gerald Cotten, co-founder and CEO of Quadriga. A visionary leader who
transformed the lives of those around him, Gerry died due to complications with
Crohn’s disease on December 9, 2018, while traveling in India, where he was
opening an orphanage to provide a home and safe refuge for children in need.”
As the web forum continue to
babble about the provenance of Cotton’s Indian death certificate and if and why
his body was cremated so quickly, what is clear is this was another big
between-the-eyes blow for the nascent crypto industry, which is still
trying to find its feet after a year of market
slides and scandals.
After all, it is very hard to
think of any other industry that could claim to lose almost $200 million of its
investor’s money because it mislaid some keys.
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