Digital currency exchange, Quadriga CX, lost all access to its digital “wallet” worth almost $200 million after the company’s CEO took the passwords to his grave, a court document said.
Filed in January 31st in Halifax, Nova Scotia, the court document shows that the digital startup asks for creditor protection while they address they’re $20 million problems.
The online startup that handles cryptocurrencies of thousands of its clients cannot retrieve $145 million worth of digital money in Bitcoin, Litecoin, Ether, and other digital tokens. The company also said that the Vancouver-based Quadriga CX could not pay C$ 70 million it owes.
Quadriga CX’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.
“Unfortunately, these efforts have not been successful.”
CEO took everything to his grave
The access to Quadriga CX’s digital ‘wallets’ were 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.
The CEO has been described as a security conscious person where his digital resources and assets including email passwords, messaging system, and laptop are all encrypted. He took the majority of the responsibility in handling the businesses including handling of funds, banking, and account to safeguard the assets of the company. 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 shows that success has been very “limited”.
The security measures implemented by Cotten are understandable considering that cryptocurrencies are vulnerable to data breach and hacking. Virtual currency exchanges suffered at least five significant attacks last year. Japan has hosted two of the biggest known crypto hacks: the Mt. Gox debacle of 2014 and the theft of nearly $500 million in digital tokens from Coincheck Inc. last January.
This $200 million problem of Quadriga CX now serves as a cautionary tale in the unregulated world of cryptocurrencies. /apr