A $200 Million And More Problem: FBI, RCMP, And Other Crypto Exchanges Investigates QuadrigaCx

Firms and Public sectors investigate the QuadrigaCx $200 million problem

The QuadrigaCx debacle has been a source of many questions from both its customers and the rest of the cryptocurrency industry as to what had happened to the almost $200 million funds that the company now owes from its customers.

The Federal Bureau of Investigation (FBI) and the Royal Canadian Mounted Police (RCMP) are looking into the implosion if QuadrigaCx after almost $200 million of funds went missing following the death of its CEO Gerard Cotten.

According to Jesse Powell, Chief Executive Officer of another cryptocurrency exchange company, Kraken, both law enforcement agencies have been in touch with him and his company to uncover the truth behind the $200 million problems QuadrigaCx, which is currently seeking court protection from creditors in Canada, is facing right now.

The online startup that handles cryptocurrencies of thousands of its clients cannot retrieve $145 million worth of digital money in Bitcoin, Litecoin, Ether, and other digital tokens. The company also said that the Vancouver-based QuadrigaCX could not pay C$ 70 million it owes.

QuadrigaCX’s directors posted a notice on the firm’s website on Jan. 31 that it was asking the Nova Scotia court for creditor protection while they address “significant financial issues” affecting their ability to serve customers.

“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,” the firm wrote.

The access to QuadrigaCx digital ‘wallets’ was lost after the passing of the company’s Chief Executive Officer, Gerald Cotten, who died December 9 in India due to complications from Crohn’s disease at the age of 30.

According to QuadrigaCx, to avoid being hacked, a usual technique to take over digital companies, Cotten moved “majority” of the digital coins owned by the company to cold storage, said by widow Jennifer Robertson, in a court affidavit.

Although efforts to hack in the encrypted past life of Cotten were made, reports show that success has been very “limited.”

However, Powell said that he does not believe that QuadrigaCx has ever transferred $136 million in funds to the so-called cold storage; a hardware device not connected to the internet used to store cryptocurrencies.

Examination of the blockchain, the public ledger that shows the record of transaction of different cryptocurrencies like Bitcoin and Ethereum, revealed that the funds were transferred to ‘hot wallets,’ internet connected storage in other crypto exchanges.

A report published by crypto research and consulting platform ZeroNonCense on February 28 theorized that the CEO have probably stored a significant amount of cryptocurrency in different crypto wallets in some crypto exchanges. This claim was later corroborated by Kraken CEO Jesse Powell and MyCrypto CEO Taylor Monahan.

More precisely, the author of the report reportedly “believes that there is a very strong possibility” that nearly 650,000 ETH belonging to QuadrigaCX were stored on the Kraken, Bitfinex and Poloniex crypto exchanges during QuadrigaCX’s operations. The report claims that the fact that QuadrigaCX had accounts on all those exchanges is established and proven and that at the time they were sent, the funds were worth over $100 million.

ZeroNonCense explains that — given the affidavit of the founder’s widow Jennifer Robertson that neither she nor other individuals involved with the exchange knew where Cotten stored the crypto assets — it is possible that they were not aware of these storage practices.

Aside from Kraken and Poloniex, the report opened the possibility of Cotten storing more crypto money in other exchange companies. A report by Big Four audit firm Ernst & Young, which claimed that the exchange’s cold wallets have been empty and unused since April 2018, could be explained by the possibility that the assets are instead stored on those exchanges, ZeroNonCense hints.

Kraken’s CEO Powell offered a $100,000 reward for information that will unlock the mystery behind QuadrigaCx’s multimillion problem. He said that he is doing this partly because he wants to help Kraken customers who lost their funds in QuadrigaCx. Further, because of the debacle, many people are losing trust in the crypto industry. Powell also urged the FBI and RCMP to subpoena other crypto exchanges to help uncover the truth behind QuadrigaCx’s problem. /apr

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