Canada’s Biggest Exchange Fumbles... Terribly
That's all I can really say right now.
QuadrigaCX is the BIGGEST crypto exchange in Canada.
Unfortunately, its founder, Gerald Cotten, passed away in December 2018.
Adding to the melancholy, approximately 115,000 of QuadrigaCX’s users can’t take back their funds from the exchange.
About $190 million worth of QuadrigaCX users’ keys and coins cannot be accessed or retrieved by ANYONE. Not by the users, and not by anyone in the company.
That’s because Cotten was the only person with access to the company’s holdings, and that information has seemingly died along with him.
Naturally, this has caused quite the panicked scramble, and even the authorities have gotten involved.
Today, I’ll go over what caused this disaster and how we can prevent something like this from EVER happening to our investments.
Here’s how QuadrigaCX and its users’ nightmare transpired.
The exchange’s founder, Gerald Cotten, was in India during December 2018 to do some philanthropic work but sadly passed away while visiting due to complications with Crohn’s disease.
Quadriga decided to wait over a month before publicly announcing Cotten’s death. And when users became understandably anxious and tried to withdraw their money, Quadriga shut down its website and ghosted.
It showed itself again about a week later, revealing that Cotten was the only person who had the credentials to transfer Quadriga’s funds between their cold and hot wallets.
Quadriga stores the majority of its holdings on its offline and secure cold wallet, while having only a small amount of funds on its online server, or hot wallet. This was done for security purposes so that the majority of the company’s funds are protected while only a small amount is at risk of online maliciousness.
Quadriga hasn’t made its troubles ANY better by accidentally sending 103 bitcoins, valued at $468,675, to Quadriga’s cold wallets.
You mean the company transferred near half a million dollars to its cold wallets... the cold wallets only its dead founder can access?
Insert face-palm here, please.
As you can imagine, Quadriga is in court over this whole debacle, with a hearing held last week over Valentine’s Day. About a dozen lawyers are representing the 115K people who have lost their investments and are seeking $142 million in cryptocurrency and $52 million in cash.
But QuadrigaCX is completely broke. It owes $75K to its attorneys and claims, “As of today, we don't have anything.”
Some Quadriga users have had their withdrawal requests honored, which is great. Some, however, have been getting deposits from a company named Robertson Nova Consulting Incorporated. Users have researched the company, and the email address that’s on the reply-to line appears to be a woman by the name of Jennifer Robertson.
She just happens to be Gerald Cotten’s widow...
The problem is that Jennifer has denied any involvement in her husband’s businesses. But with Quadriga users receiving bank deposits from a company associated with her, it appears she knows more than she’s letting on, which could legally impact her.
There have been some theories and conspiracies regarding whether Cotten actually died, or whether he faked his death for some odd reason.
According to court records, Jennifer Robertson has provided Cotten’s death certificate as proof.
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It’s So Avoidable!
How can we prevent something like this from happening to us?
A colleague and I were discussing this Quadriga fiasco over lunch, and we shared the same sentiment and preventative measure nearly instantly...
1. Don’t let exchanges hold your keys and coin!
I’m a big believer that you should be the one to hold and handle anything important to you. I have low trust for people and entities that handle my personal information, as I know I’m the only one who’s going to give a hoot when it comes down to it.
Some would call me shrewd, I guess.
I’ve adopted that belief system for my crypto investing as well. I don’t have exchanges holding my keys and other important information. I prefer storing them securely at home on my offline hard wallet.
That takes me to the next way you can avoid a situation like Quadriga’s...
2. Hold your own keys and coin!
A few weeks ago, I provided alternatives to holding your investments on an exchange. If you don’t want a fate similar to Quadriga’s users, I’d recommend checking it out.
If you’d prefer storing your keys and coin on an online platform, I’d say Upfiring looks attractive. It's an incentive, decentralized P2P file-sharing application that uses smart tokens and UFR tokens. It is available on Linux, Windows, and Mac operating systems.
Stay secure, stay safe,
John Butler, Jr.
John Butler is Token Authority’s contributing editor. He first learned of Bitcoin in 2010 when it was still unknown. Since then, he has seen cryptocurrency and blockchain technology swell in popularity across the globe, making innovators and investors plenty rich. Every week, he brings Token Authority readers compelling information for crypto investing.