The high-profile death of Gerald Cotten, CEO of Quadriga Crypto Exchange, is getting more and more suspicious by the day.
Jesse Powell, the CEO of rival crypto exchange KrakenFX, called the death “bizarre and, frankly, unbelievable.”
Is This A Crypto Exit Scam?
Did Cotten Fake His Own Death to Abscond With $250 Million?
The sheer amount of missing funds, as well as several odd circumstances surrounding Cotten’s death, and there are elements in the story that don’t seem to add up — a few too many one-in-a-million chances, have led to theories he faked his death in an elaborate scam to rob his customers.
Among a few reasons some crypto pundits are scratching their heads:-
- With a proper treatment plan, the risk of death from Crohn’s disease is currently about 3%.
- Cotten’s will was signed on November 27, less than two weeks before his death on December 9.
- Even before Cotten’s death, the company had transaction delays and legal disputes led to millions of dollars being frozen.
Here’s what we know so far:-
Cold Wallet Case
Cotten died on December 9, 2018, due to complications arising from Crohn’s disease at the age of 30. This itself is rather suspicious as not only the risk of death from Crohn’s disease is very slim at about 3%. What are the chances a sick man will even contemplate to travel abroad (to the third world)? Let alone building an orphanage in India while he has tons of problems to deal with at home (such as CIBC lawsuit that is causing a software engineer unable to retrieve his C$560,000 ($422,000) deposit)?
It’s said both a statement of death issued by a Halifax funeral home and a death certificate issued by the Government of Rajasthan’s Directorate of Economics and Statistics report that he died in Jaipur, India. However, some users raised red flags — and pointing out that in parts of India, it’s possible to buy a death certificate.
Gerald Cotten took $250M in assets locked by passwords to grave
Before his death, Cotten shifted the crypto holdings into “cold storage,” offline physical devices that allow protection from thieves and hackers, his widow said. Those transactions paralyzed the funds, Robertson said, as Cotten was the only one with access. Robertson’s attempts to hire consultants to help crack the code have so far been unsuccessful, she said.
“The Quadriga story doesn’t make sense,” Emin Gün Sirer, a professor at Cornell University and co-director of the Initiative for CryptoCurrencies and Contracts, told Bloomberg.
“If the funds are frozen and the cold wallet is inaccessible, it should be possible for the exchange to provide the cold wallet addresses so their claims can be verified with the help of the blockchain.”
Little evidence of cold wallets containing $250M
Experts who have analyzed publicly available cryptocurrency transfer patterns say there’s little sign of digital vaults stuffed with millions and linked to Quadriga.
Bloomberg talked to Elementus founder Max Galka, who said that it couldn’t find any cold wallets holding Ether, one of the cryptocurrencies that’s listed as missing, and that Quadriga was moving Ether to bigger trading platforms through the middle of January.
“There’s some fishy business going on.” Said Galka.
On a related note,
Nearly $1 million worth of ether (ETH) left QuadrigaCX and went to other cryptocurrency exchanges in December, the same month its CEO died, a CoinDesk review of public blockchain data shows.
In a series of transactions sent from QuadrigaCX’s hot wallet (meaning one connected to the internet), more than 9,000 ETH moved from the embattled Canadian exchange to accounts at Binance, Bitfinex, Kraken and Poloniex (owned by Circle).
The lion’s share – 5,000 ETH – was transferred from Dec. 2 to Dec. 8 – the day before the recorded death in India of QuadrigaCX founder and CEO Gerald Cotten. Most of the ether sent that week (4,550) ended up at Binance.
Here’s all the QuadrigaCX Ethereum data for viewing & analyzing: –
Tavish Gilmour @TavishGilmour
“Don’t Trust, Verify.”
Jennifer Robertson, widow of Gerald Cotten @QuadrigaCoinEx has veritably lied in her affidavit to the Court. Wallet never contained 94 $BTC, ever.
That said, did Cotten fake his own death in an elaborate scam to rob his customers? As the old saying goes, if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.
But those concerns aside, there’s also the unusual way that Quadriga was run. As reported, the company was essentially a one-man show.
When the CEO of a bank dies, the bank’s assets and holdings don’t get buried along with them.
But when it comes to cryptocurrency exchanges — places where you can trade your real-world money for digital currencies like Bitcoin — things work differently. At least, that was the case for Vancouver-based exchange QuadrigaCX.
Perhaps the bigger mystery is why anyone trusted Quadriga in the first place?
“Quadriga had no physical office, no corporate bank accounts or even an accounting department. Mr. Cotten employed only a small team of contractors. Cryptocurrency exchanges in Canada are not regulated. No one was watching over the company.”
After all, Quadriga has a rather negative reputation since early 2018 – Here is one such complaint: –
Michelle Yi and her husband Min Jae Kim of Coquitlam, B.C., thought they’d found a relatively low-risk way to make money with Bitcoin.
Like many others, Michelle Yi and her husband Min Jae Kim of Coquitlam, B.C., decided to put money into Bitcoin after the cryptocurrency surged to an all-time high of nearly $19,000 U.S. ($24,500 Canadian) at the end of last year.
The plan was to buy Bitcoin in order to sell it in South Korea, where the digital money was trading at a premium of 40 per cent to 50 per cent compared to the North American market. It seemed like an easy and relatively low-risk way to make a hefty profit. So the couple sent a $100,000 wire transfer to Vancouver-based cryptocurrency exchange Quadriga CX.
That’s when their money seemingly vanished into thin air.
Although the couple were eventually reunited with their money after media and the police got in touch with Quadriga about the issue (not in the case of software engineer Tong Zou whose half a million dollars life savings was taken by Cotten to the grave), the Yi and Kim’s story illustrates another set of risks facing those who invest in Bitcoin and other digital tokens — one that has little to do with gyrations of the crypto market, hackers, or criminals using virtual currencies to buy and sell contraband.
Crypto Advice: “There Is Little Help For Investors Of Cryptocurrency When Things Go Wrong”