QuadrigaCX Scandal: Complete Guide (to Disaster)

Conor Maloney

March 13, 2019

Anyone with a finger on the pulse of the crypto space over the last few months has heard of Quadriga CX, Canada’s largest crypto exchange.

Rumors have been spreading like wildfire regarding the completely bizarre circumstances of the massive security breach that allegedly led to the loss of $190 million in assets – let’s take a look at the facts.

January 14, 2019: Death of the Founder

Immediately, this is a controversial subject to some, as there are those in the space who believe that Gerald Cotten is still alive. Let’s work with the widely-held view for now, which is that on January 14, the 30-year-old co-founder of the exchange died suddenly while on honeymoon in India.

What would have been an individual tragedy under any circumstances for Cotten’s loved ones became the subject of international media headlines instead when it emerged that, incredibly, and in defiance of all logical security protocols, Cotten also had sole and exclusive access to the vast majority of funds being held on the exchange.

Conspiracy Theories



So this is all extremely suspicious, and borderline ridiculous. Social media exploded at the notion that the exchange had not been hacked but had simply “lost” the $190 million, and that throughout the entirety of the history of Canada’s largest exchange, the only thing safeguarding the funds was the fortunate wellbeing of one individual person, a person allegdly suffering from Crohn’s disease.

Why the health of a sick man would be the only barrier between the permanent loss of almost $200 million was anyone’s guess, and many people simply guessed “fraud”. It’s no secret that India is a place where fake death certificates can easily be acquired, and Crohn’s disease isn’t typically fatal for someone in their 30s.

Kraken Exchange Bounty

Among the skeptics was Jesse Powell, CEO of Kraken exchange, who offered a $100,000 bounty for information regarding the true circumstances of the breach.

Cold Wallet Empty

Ah. So, seemingly the cold wallet where the $190 million was stored has been announced to be empty, according to the exchange, making the funds look less “lost” and more “stolen”.

In fact, the Bitcoin wallets were reportedly empty since April 2018, making it all look very much like a blatant exit scam with a few dramatic twists.

The Exchange Had Been Struggling

By this stage it may not surprise you to learn that the exchange had been struggling financially due to the ongoing crypto-economic downturn, with the Canadian Imperial Bank of Commerce (CIBC) freezing $30 million worth of QuadrigaCX funds because it couldn’t identify the owner of the funds.

Cue alarm bells ringing and massive, unavoidable red flags waving in the air.

The bank’s actions led to less people using the exchange and the 24/h volume dropped to just $600,000 by late 2018.

Cotten Changed His Will

Not only did Cotten’s death conveniently handle a lot of the financial problems the exchange was having by “losing” all available funds, the CEO changed his will, leaving his personal property worth nearly $10 million to his wife of two years, Jennnifer Robertson.

They had, in those two years, bought 16 properties and an airplane despite the public financial difficulties reported by the exchange. Such as someone emptying all the Bitcoin from the exchange wallets. Hmm.

Death Certificate

Cotten was admitted to Fortis Escorts hospital in Jaipur on December 08, suffering from vomiting, diarrhea, and abdominal pains. He reportedly died in hospital and was transferred to his hotel. An embalmer refused to embalm the body because he had not died in the hotel, but a second embalmer took the job and the body was delivered by the hotel. The death certificate misspelled Cotten’s name as “Cottan”.

He was buried in a closed-casket funeral before it was public knowledge that he was dead.

Faked His Own Death
Obviously, there’s quite a strong case to suggest that Cotten faked his own death, although Kraken exchange CEO Jesse Powell doesn’t think so.

“It seems pretty likely that he is dead,” said Powell, during a Kraken podcast. “However there was no autopsy performed so there’s speculation over how he developed this perforated stomach in the first place. It doesn’t seem like a usual thing for someone with Crohn’s to develop.”

Coinbase CEO Brian Armstrong weighed in on Twitter, agreeing that Cotten is likely dead, and suggesting that the exchange is using his death to cover up gross fraud or mismanagement of funds.



Total Lack of Oversight

Whatever really happened, the fact that there could even be a question of who was in control of the $190 million shows a total lack of oversight leaving consumers unprotected. From my perspective, it certainly looks like either the exchange or Cotten himself stole the funds, but more info will hopefully emerge from the Kraken investigation.

What do you think happened? Is Cotten really dead?

Let us know on Twiter @cryptoisomin