$147m Crypto At Stake As Exchange Owner Dies in India, Claims Bankruptcy
How funds worth about $147 mln in cryptocurrency would be recovered from the QuadrigaCX exchange still tops the list of the agitation made by its more than 110,000 users. This is despite a Nova Scotia Supreme Court granted the exchange’s appeal on Feb 5 to appoint Ernst & Young Inc., as an independent third party to oversee the proceedings to locate funds to reimburse its users while a 30-day stay holds. The exchange had earlier informed that efforts to address their liquidity issues in the past weeks have not been successful.
Reports say only its CEO, Gerald Cotten, who died in India, has the password to the cold wallet of the Canadian exchange which holds its major crypto reserve. Cotten died due to complications with Crohn’s disease on December 9, 2018 while travelling in India to open an orphanage for children in need, the exchange posted on its Facebook page on January 14· According to CoinDesk, the exchange holds in its cold wallet about 26,500 bitcoin ($92.3 mln), 11,000 bitcoin cash ($1.3 mln), 11,000 bitcoin cash SV ($707,000), 35,000 bitcoin gold ($352,000), nearly 200,000 litecoin ($6.5 mln) and about 430,000 ether ($46 mln), totaling $147 mln. Only a minimal amount of these coins were reported stored in the hot wallet for day-to-day use.
The exchange last Thursday appealed for creditor protection which was heard before a Nova Scotia Supreme Court on Feb. 5. QuadrigaCX claims they do not have access to wallets with cryptocurrency worth large amount hence unable to repay its customers. The creditor protection, filed by Cotten’s widow, Jennifer Robertson as his Estate Executor, is meant to forestall any lawsuits while it seeks ways to resolve the liquidity issues.
In a Facebook post on Jan. 31, Robertson notes that the application is in accordance with the Companies’ Creditors Arrangement Act (CCAA) and meant to allow them “address the significant financial issues that have affected our ability to serve our customers.”
Effect on market
QuadrigaCX is the biggest and the only exchange in Canada to convert CAD to cryptocurrency in large amounts. Its present predicament has raised mainly trust issues. First, the ‘Not your keys, not your coin’ call which seeks to dissuade users from storing their cryptocurrencies on centralised exchanges has resurfaced.
The mistrust has been worsened by reported discrepancies in documents related to Cotten’s death casting doubts on the claim.
Additionally, some Litecoin users have claimed they have found the Litecoin cold wallet address for QuadrigaCX and funds are being moved out of it. However, while the pessimism persists, there are some hopeful investors who are still confident something good could come out after the court, banks, lawyers and law enforcement agencies go through available clues.
If the funds are not recovered, the situation would get investors’ outcry to reach relevant authority’s attention at a time when the industry is under ongoing scrutiny for regulation. It could eventually lead to the introduction of entities that help manage cryptocurrencies for as many people without losing them – some sort of an insurance-backed digital asset custody.
Also, according to Dean Skurka, a Vice President at Canadian cryptocurrency trading platform, Bitbuy, another concern about QuadrigaCX saga is how to regain investors’ trust.