Crypto Exchange Seeks Bankruptcy Protection After Founder’s Mysterious Death

More than ten years after the birth of bitcoin, the crypto industry remains riddle will con artists, scammers and fraud. And sometimes, businesses that for years appeared to be legitimate enterprises will suddenly be outed as long-running frauds – a la Bernie Madoff – when they hit a speed bump.


For Canadian crypto exchange QuadrigaCX, that moment of truth apparently arrived earlier this month when its CEO Gerry Cotten died suddenly from complications related to Crohn’s disease . According to a statement from the company, he died while traveling in India where “he was opening an orphanage to provide a home and safe refuge for children in need.”

Since his death, 115,000 customers of the exchange have been struggling with Mt. Gox-style “liquidity issues” as those trying to withdraw their funds have suddenly found it extremely difficult – if not impossible – to do so successfully. Finally, on Thursday, Quadriga’s board released a statement announcing that it would be filing for bankruptcy protection. In the statement, the company said the filing was prompted by an inability “to locate and secure our very significant cryptocurrency reserves held in cold wallets.”

An application for creditor protection in accordance with the Companies’ Creditors Arrangement Act (CCAA) was filed today in the Nova Scotia Supreme Court to allow us the opportunity to address the significant financial issues that have affected our ability to serve our customers. The Court is being asked at a preliminary hearing on Tuesday February 5 to appoint a monitor, Ernst & Young Inc., as an independent third party to oversee these proceedings.

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. Unfortunately, these efforts have not been successful. Further updates will be issued after the hearing.

The implication is, of course, that Cotten, a sickly young man with a chronic illness, was the only person who had the key to the exchange’s cold storage, and that he took this information to his grave.

This would be easy to overlook if the sum was relatively insignificant. But according to an article in CoinDesk, QuadrigaCX owes its clients a total of $190 million.

The exchange holds roughly 26,500 bitcoin ($92.3 million USD), 11,000 bitcoin cash ($1.3 million), 11,000 bitcoin cash SV ($707,000), 35,000 bitcoin gold ($352,000), nearly 200,000 litecoin ($6.5 million) and about 430,000 ether ($46 million), totaling $147 million, according to the affidavit.

It’s unclear what percentage of these holdings was kept in ‘hot’ wallets as opposed to the cold storage wallets. But adding another layer of intrigue, Cotten’s widow reportedly told a Canadian judge that her deceased husband held “sole responsibility for handling the funds and coins,:” and that the remaining team members have had “no luck” accessing the exchange’s coins.

And as users on Reddit swiftly pointed out, something about QuadrigaCX’s story doesn’t add up, leading some to ponder whether the whole business was one big scam.

On Quad’s website they write they can’t locate or access their cold wallets. The unstated suggestion is that the private keys were lost when the CEO died.

But that CEO wasn’t hit by a car. Allegedly he died from “complications related to Chrons Disease”. So while he was on his deathbed for all that time, he didn’t once think to tell someone the private keys? Highly unlikely.’

I’d also love to know the name of the “orphanage” he was supposedly building in India, and/or the name of even one independent witness who saw him building it.

QuadrigaCX made headlines last year when it challenged CIBC for refusing to process transactions involving Quadriga. However, during that time, stories like this one suggested that the fault lay with Quadriga, which appeared to be deliberately delaying – or outright refusing to process – customers’ transactions, leading money to seemingly “vanish into thin air.”

Given this checkered history, we certainly could empathize with those harboring a more conspiratorial viewpoint might seriously consider whether Cotten may have absconded with his clients’ money before faking his own death in a foreign land.

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