Update to Quadriga Investigation Raises More Questions

In a shocking new revelation, many of the cryptocurrency wallets which were meant to be storing Quadriga’s funds have been found to be empty or nearly empty. After being appointed as the auditing firm for the credit repayment process, Ernst & Young has had a month to do their due diligence, and these recent findings complicate the investigation even further.

QuadrigaCX lost $190 million of customer funds when the CEO, Gerald Cotton, died of Crohn’s disease while in India in December 2018. Ernst & Young’s work in the creditor protection proceedings has involved the release of 3 reports, the most recent of which drops a big bombshell: no Bitcoin deposits were made to the 6 main wallets since April 2018.

More Inconsistencies Cropping Up

There is no obvious reason why this would be the case, and E&Y has found some more inconsistencies. There are 14 user accounts that appear to have been created under aliases and funded using artificial deposits. Further investigation will show what activity these accounts took and how money passed through them.

Although in the creditor protection and restructuring process, it is clear that Quadriga is not a going concern and will be shutting down. One key issue that has been raised is the worries that result from users using exchanges to store their cryptocurrency rather than just to trade it.

The QuadrigaCX investigation has already entered a point where there are enough inconsistencies that it is is clear something fishy is going on. The below quote from the third Ernst & Young report states:

“To date, the Applicants have been unable to identify a reason why Quadriga may have stopped using the Identified Bitcoin Cold Wallets for deposits in April 2018, however, the Monitor and Management will continue to review the Quadriga database to obtain further information.”

The auditors are in the process of retrieving transaction and account balance data from the Amazon Web Services server, but Amazon has not released the data because Mr. Cotton operated his account as a personal one rather than business.

Past Discoveries of the Investigation

All this comes on the tail of rumors that Quadriga’s funds were stored on other cryptocurrency exchanges, like Poloniex, Bitfinex, and Kraken. This would make a large portion of these funds recoverable but raises even more questions about the unconventional fund management practices at Quadriga.

Kraken’s CEO has since announced a $100,000 reward for anyone who can provide additional information on the whereabouts of the Quadriga funds.

The Quadriga case continues to become more interesting as more details surface. It was wild enough when $190 million in cryptocurrency was considered inaccessible because all the keys were stored on a dead CEO’s encrypted laptop. But now, the money isn’t where it’s supposed to be and creditors are starting to get worried.

Canadian courts have just agreed to grant a 45 day stay of proceedings to prevent any creditors from suing until more information turns up. Cotton’s widow, Jennifer Robertson, is requesting the return of the $225,000 she lent Quadriga to finance their creditor protection, but will now have to wait as well.

Analysis is still underway and progress is being made, but right now it is still very much up in the air whether Quadriga users will be able to recover all (or any) of their funds.