QuadrigaCX Ethereum (ETH) Stash Found on Exchanges

New research from Zerononcense suggests that QuadrigaCX may have used the cold wallets of other exchanges instead of building its own secure cold storage and the funds may be recoverable.

The funds of QuadrigaCX, at least when it comes to its Ethereum (ETH) stash, may not be lost if it turns out exchanges are actually holding the tokens in cold storage. New research by blogger James Edwards on Zerononcense suggests that the founder of QuadrigaCX may have sent funds to exchanges but not with nefarious intentions.

“Altogether, a cumulative 649,708 Ethereum was sent to Kraken, Bitfinex, and Poloniex directly by QuadrigaCX, which was worth a total of $100,490,150 at the time of transfer,” Edwards explained in the latest research.

QuadrigaCX closed in January after announcing its cold wallets had become inaccessible due to the death of its founder, Gerald Cotten.

Previous research pointed to outflows from QuadrigaCX’s cold wallets ending up on Kraken or other markets. The initial suggestion was that the funds were liquidated. However, there may be a chance the ETH in question is still stored in accounts belonging to the exchange.

However, there is no hard and fast connection between the ETH transfers and accounts on Bitfinex, Kraken, or other markets. The alternative explanation is that users sent funds from the QuadrigaCX hot wallet directly into their Bitfinex or other accounts. This practice of transferring funds directly between exchanges is not encouraged, but it is a possibility.

An estimated 600,000 ETH has moved from Ethereum addresses belonging to the exchange, and into other markets. It is possible that some of the funds described in an affidavit by Cotten’s widow, Jennifer Robertson, are, in fact, to be found spread throughout the crypto market ecosystem.

The search for the missing funds, including Bitcoin (BTC) and Litecoin (LTC), continues. Recently, the Kraken exchange announced a bounty for a good lead on their location. Kraken co-founder Jesse Powell took the matter to heart due to the close links between the two platforms. QuadrigaCX has been used for cashing out as an alternative to Kraken, and some traders performed arbitrage between the exchanges. The sudden closing of QuadrigaCX led to the loss of as much as $190 million, according to various estimates.

Sending funds to exchanges also raised the issue of the ownership of the potential storage accounts. QuadrigaCX required of its traders to submit to a know-your-customer (KYC) procedure, so analysts believe the exchange could have hidden the funds in fake accounts:

https://twitter.com/chico_hawk/status/1094376336045604869

The suggestion is that QuadrigaCX kept pictures and passport data, which were sufficient for KYC of many other exchanges.

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