QuadrigaCX: Missing Wallets, Identity Fraud, and $180M Losses for Traders

QuadrigaCX, the insolvent cryptocurrency exchange, is due for a court appearance today to seek creditor protection. In the meantime, the whereabouts of its cold wallet remain elusive.

Canadian exchange QuadrigaCX, which closed on January 28, is due to appear in court on Tuesday for a decision on its creditor protection application, CBC reported. The Nova Scotia Supreme Court is expected to appoint a monitor to supervise the procedure, with the exchange admitting to obligations of $180 million to affected traders.

The company has presented an affidavit by Jennifer Robertson, the widow of CEO Gerald Cotten, where she points to significant reserves of several leading coins. However, the blockchain analysis is still failing to unearth the location, which raises suspicions that the exchange was insolvent from the start.

The affidavit lists the reserves as follows:

“As of January 18, 2019, the following cryptocurrency balances were recorded — Bitcoin: 26,488.59834, Bitcoin Cash: 11,378.79082, Bitcoin Cash SV: 11,149.74262, Bitcoin Gold: 35,230.42779, Litecoin: 199,888.408, and Ethereum: 429,966.0131.”

In earlier statements, QuadrigaCX has also pointed to the alleged presence of a multisig cold wallet. This information clashes with previous claims that Cotten was the only person with knowledge of the private keys. The discovery was made in a lengthy analysis by @ProofOfResearch, which was recently removed from Medium and published on a personal blog.

The disparity between claims of cold wallets with significant stores and the lack of any address pointing to those holdings undermines the reputation of QuadrigaCX. Adding to the turmoil is the discovery that the name of co-founder Michael Patryn was a case of identity fraud, the co-founder actually being Omar Dhanani. In the past, Dhanani faced arrest for running money-laundering operation Liberty Reserve. The information quickly spread across social media.

https://twitter.com/boxmining/status/1092624133974839297

Based on the affidavit, 115,000 accounts faced losses of digital assets or claims to cash withdrawals. The exchange admitted to owning $180 million to affected users, with total liabilities exceeding $250 million when additional obligations are factored in.

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