QuadrigaCX in Bankruptcy, New Discoveries Suggest Older Scam Activity
Parallel to the official investigation, Reddit users are digging out any related information to the now-defunct exchange.
Just a day after the QuadrigaCX exchange opened up a bankruptcy procedure, new information shows that the market operator may have skirted the law in the past. An accidental tracking of wallets belonging to QuadrigaCX show a connection to sites offering high-yield investments, also known as scam sites offering to double the Bitcoin (BTC) amount.
In a Reddit thread, the connection was made between the QuadrigaCX wallet and those scam sites. The address used for one of the last withdrawal transactions on the exchange has also received mentions in other sites, at one point in relation to the Nicehash exploit.
At this point, several addresses have been identified as belonging to QuadrigaCX and holding significant balances before being emptied out. The investigation for the exchange continues, and the Monitor on the case, Ernst&Young, will have additional rights to demand documents and testimony.
Other discoveries link one of the QuadrigaCX partners, Michael Patryn, an alias for Omar Dhanani, to a scheme for money laundering known as Liberty Reserve. Patryn has known connections to an identity theft group, and has also offered money laundering opportunities through the Midas Gold exchange. The exchange preceded Bitcoin and digital coins, and used centralized virtual assets.
Liberty Reserve itself was a type of centralized digital asset, akin to in-game currencies or Linden dollars, which existed until 2013. The Midas Gold exchange was instrumental to trading Liberty Reserve and ensuring liquidity and potentially money laundering through trades.
The new findings add to previous discoveries on the dubious activity of the exchange, including suggestions that the business may have been used for personal enrichment and asset purchases. This led to a special order to block any sales or transfers of the Cotten estate.
The QuadrigaCX has shown it still may have access to around $70 million held with third-party payment processors. However, no wallets or digital asset balances have been shown to exist, either in cold storage or stored in accounts on other exchanges.