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The four major doubts behind the death of the founder of Bitcoin Exchange
Gerald Cotten, founder of QuADRiga CX, Canada's largest bitcoin trading platform, died in December 2018. The troubled Quadriga CX owes customers $200 million, including about $147 million in encrypted digital currency, and the keys to these encrypted digital currencies are only owned by Gerald Cotten. With the death of Gerald Cotten, "$147 million" was locked. .
On February 5th, US Eastern Time, the event that triggered widespread concern among digital cryptocurrency investors has made progress. The Canadian Corporate Creditors Arrangement Act (CCAA) has issued a creditor protection order to deal with pending financial issues for clients of the platform.
The founder of the encrypted digital currency exchange suddenly died
According to reports, Gerald Cotten died of Crohn's disease in Jaipur, India, in early December 2018.
△ The platform announced that its founder died of illness, source: Facebook / QuadrigaCX
His wife, Jennifer K.M. Robertson, was appointed as a director of the company. Jennifer didn't know the password and didn't know how to recover. Even after several weeks of hard work by the company and his wife, it was unsuccessful to retrieve the encrypted digital currency in the cold wallet. As a result, the exchange was unable to repay nearly $200 million to customers, triggering anger and doubt among investors in the exchange.
According to the documents, as of January 31, 2019, about 115,000 users registered their balances on the exchange, involving $70 million (about $53 million) in legal currency and $180 million in cryptocurrency assets. $147 million), including approximately 26,500 BTC ($19.53 million), 11,000 BCH ($1.3 million), 11,000 bitcoin SV ($707,000), 35,000 bitcoin gold ($352,000), and nearly 200,000 LTC ($6.5 million) and About 430,000 ETH ($46 million).
On February 5th, the US Supreme Court of Nova Scotia approved the company’s 30-day request for protection of creditors and appointed accounting firm Ernst & Young. Clean up the financial situation of Quadriga CX and explore possible sales.
△Quadrigacx platform official website statement
In a recent statement issued on February 5th, Quadriga CX said it would handle pending financial issues for clients of the platform under a creditor protection order issued by the Canadian Corporate Creditors Arrangement Act (CCAA). The statement stated:
“Although in the past few weeks, Quadriga CX has been working to address liquidity issues, including trying to recall cryptocurrencies in cold wallets and seeking remittances from other financial institutions, but unfortunately these efforts ended in a failed outcome. Since these issues cannot be resolved in time, the platform can no longer continue to provide users with transactions. At present, Quadriga CX has applied for creditor protection, so that every effort can be made to mobilize funds and solve customer problems. According to CCAA, the court has appointed Ernst & Young accountants. The firm (Ernst & Young Inc.) oversees these proceedings as an independent third party."
Many people questioned why only one CEO has such a huge amount of money?
The QuadrigaCX Exchange highlighted its strengths in a publicity in July 2018, such as "Safety is our top priority", "Security is one of the most important issues in Bitcoin. QuadrigaCX is taken in the bitcoin industry Some of the most advanced security measures, including the use of refrigeration for most of the Bitcoin in our system."
In the affidavit, Jennifer wrote that her husband runs the company through an encrypted laptop and spends most of his time working at their home in the Autumn River in Nova Scotia. Regarding these digital currencies, Jennifer said: "The normal procedure is that QuadridaCX founder and CEO Gerald Cotten transfers most of the currency to the cold wallet to protect the currency from hacking or other virtual currency theft," she added. Gerald Cotten is solely responsible for processing the funds, and the remaining members of the team do not have access to the exchange's cold wallet.
According to the CoinMarketCap website, according to the daily trading volume, as of October last year, the exchange index ranked in the middle of the entire index. Court documents show that the exchange stores the currency in "hot wallets" and "cold wallets." The "hot wallet" is connected to the Internet to quickly meet the withdrawal requirements; the "cold wallet" is stored offline and stored in physical form, such as on a USB stick, which makes them safer.
At the end of the affidavit, Jennifer Robertson asked the court to suspend the proceedings. “The exchange urgently needs to suspend the proceedings,” she writes. “This will give QuadrigaCX and its contractors more time to look for any available cryptocurrency and negotiate on the bank drafts available to QuadrigaCX.” She believes that The trading platform may have significant value, but this value may be reduced if the exchange is sued. ”
Ernst & Young wrote in a preliminary report to the court that the company faced a series of unusual facts about the case. The documents show that Quadriga CX does not have a clear accounting system and no bank account. Ernst & Young writes that Cottonon will usually send instructions to employees via e-mail to announce payments made through third parties, and the inflows and outflows of payments "are not systematically tracked."
According to court documents, the company has a large number of assets in a variety of cryptocurrencies. The undisclosed bank drafts issued in the name of the company total about $30 million, of which $375,000 is held by others. Several companies have proposed to acquire the company, which may be valuable to competitors.
Accident or conspiracy? At least four doubts
Since its inception, digital cryptocurrencies have claimed to be “absolutely secure,” and the premise of “absolute security” is the key—only the person with the key can take the digital cryptocurrency, and no other person or institution can get involved. But this "absolute security" actually has a major security risk. With the sudden death of the founder, this huge $190 million bill seems to have inevitably become a secret buried deep underground.
Doubt 1: Blockchain experts speculate that Quadriga CX has never used a cold wallet from the beginning
"In normal normal procedures, Coton, the founder and CEO of Quadriga CX, will transfer most of the money to cold wallets (wallets that have not been used in a networked environment) to protect them from hackers or theft." According to the analysis of the platform members, the CEO had the full responsibility to handle the funds during his lifetime, and she and other members of the team did not have access to the exchange's cold wallet. "Despite the painstaking search, I still can't find the key or the trace of the recovery key tool written anywhere."
Although she had consulted an expert and she “recovered some digital currency and some limited information from the other computers and mobile phones of the founder,” most of the currency still remained in his main computer. Touching is like "sinking the sea."
However, a blockchain research scholar named "ProofofResearch" published a paper saying that according to the company's 31 bitcoin addresses, there is no evidence that Quadriga CX uses cold wallet technology.
In addition, according to a CCN report on February 4th, Taylor Monahan, CEO of blockchain service company MyCrypto, found that Quariga CX did not have an Ethereum cold wallet for storing user funds.
“I didn’t see signs that Quadriga CX had provided a cold wallet for Ethereum.” Monahan evaluated the three main Ethereum addresses used in the exchange and found no evidence that the addresses were used as cold for the transaction. wallet. In an interview with CCN, she said that she still needs to analyze roughly 500,000 transactions before she can reach a definitive conclusion. But there is a great possibility that the cold wallet does not exist at all.
△Monahan issued a question about Quadriga CX holding an Ethereum cold wallet, source: Twitter@Tayvano_
Wall Street observation scholar and financial writer Chen Sijin said that even more shocking is that the survey shows that many of the funds seem to have been transferred to external transactions. Then, after the death of the founder, the key of the cold wallet was unknown, so the huge money sinks into the sea, and I don’t know where it is. Is the money always there, or has it disappeared out of thin air?
Doubt 2: Well-known lawyers believe that the co-founder may have a criminal background
Attorney Stephen Palley said on social networking Twitter that according to his reliable sources, Quadriga CX co-founder Micheal Patryn has another identity – the pseudonym of the swindler Omar Dhanani. According to the criminal record available, Omar Dhanani was also named Omar Patryn in a 2005 case.
Omar Dhanani aka Omar Patryn's court file, source: Twitter@StephendPalley
It is reported that Omar Dhanani and five other people were arrested and imprisoned for illegally stealing other people's online identity and participating in credit card fraud. They have worked together to organize the criminal website Shadowcrew (Shadow League).
In fact, when the "Shadow League" was smashed by the US Secret Service, Omar Dhanani was still a resident of the Fountain Valley in California. According to the internal system investigation of the local hukou, his relatives include Nazmin Dhanani.
Intriguingly, the Nazmin Dhanini and the aforementioned Quadriga CX co-founder Macheal Patryn have jointly opened a number of companies, one of which is the "MPD advertising company."
Doubt 3: The legal change of the will is bizarre, and the death certificate is full of loopholes.
After more than a month of silence, Quadriga CX announced in January that the founder had died in India on December 9 last year. At the same time, the publicly-provided death certificate provided by India even spelled the name of founder Cotten.
△ spelling the founder's surname Cotten into Cottan's death Source: Twitter@ImMattJones
Guillaume Berube, a spokesperson for Global Affairs Canada, who is in charge of foreign affairs, said the office had helped a family of Canadians who died while visiting India, but because of India’s He could not comment further on the privacy law.
According to Bloomberg's recent report, Gerald Cotten, CEO and founder of Quadriga CX, legally changed his will on December 9, 12 days before his death, sparking heated discussions.
Chen Sijin pointed out that the founder did not explain the property when he revised his will. In general, the rich will re-establish their wills just in case they travel to a foreign country for business or travel. In the unlikely event of a misfortune, two common ways in which a family member can access his or her important documents are: 1. Deliver the password and authority to the lawyer; 2. When you are alive, fully trust the person you love. However, it is reported that the founder's notebook is very difficult to crack. If the money does exist, then he must be extremely cautious.
Doubt 4: The platform bank crisis is emerging
It is understood that, in fact, this is not the first time Quadriga CX has been in crisis. As early as October 2018, the Canadian Imperial Bank of Commerce (CIBC) frozen the Quadriga CX up to 22 million. The bank claims that it is impossible to determine the true ownership of these funds.
According to the Globe and Mail, the bank (CIBC) has sought assistance from local courts to determine the best response. CIBC said in court documents that it had received a total of 388 depositors out of seven of the wire transfer cancellation applications, but was not sure if they needed to approve the applications. The bank said it had tried to investigate the truth behind the cancellation of these wire transfer transactions, but there was no clue. Currently, the bank is seeking a strategy to pay these payments to the courts and let the justice system finally decide where the money will go.
According to the Quadrica CX's argument, CIBC has deliberately deducted depositors' funds since January 2018. It also accused the bank of trying to extend the holding of these funds and trying to rationalize an act that should not have happened at all. Quadriga CX also emailed its users that Canadian banks are colluding and blocking transactions, making virtual currency operations more difficult in Canada.
Editor in charge: Zhao Weiwei RF11518
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