Canadian exchange’s missing $190 million mimics exit scam

  • By Tom Cleveland

  • February 7, 2019
  • 1:33 am BST

What a tangled web we weave, when first we practice to deceive, an old phrase that is appearing more appropriate each day as the QuadrigaEX story of the missing $190 million unfolds. The crypto industry is aghast, as it attempts to accept the mysterious death of Gerry Cotten, the 30-yearold CEO of a troubled Canadian crypto exchange that will forever be the oddest case of an exchange admitting that it cannot find or access investor funds. Conspiracy theories abound, but the truth is hard to come by.

The facts that have been revealed on deeper inspection do not seem to fit together to form a plausible explanation of the tragedy in progress. QuadrigaEX was at one time the oldest and largest crypto exchange in Canada. Its primary owner, Jose Reyes, also owned the processing company that provided services for the exchange. Reyes got into a dispute with the Canadian Imperial Bank of Commerce (CIBC) a year ago, the bank seized $28 million of the exchange’s funds, and the matter has been tied up in the court system. The Accountant of the Superior Court must determine final ownership issues.

The plot thickens and becomes a jumbled mess in January of this year when the family announced that its CEO, Gerry Cotten, had passed away in early December in India of Crohn’s disease, while trying to set up an orphanage. To make matters worse, he was the only one with the password to the exchange’s “cold storage” vault. With no password, investor “keys” and $190 million in account balances may be lost forever. The family also filed for bankruptcy protection.

News today is that the location of Cotten’s apparent death is an area of India known for providing fake death certificates. One investigative reporter discovered that it is a common occurrence for people with huge debts or responsibilities to purchase what are known as “death kits” for a minimal fee that provides for doctors, administrators, and witnesses to corroborate everything necessary for the release of a death certificate. It is easy to fathom why investors are demanding that Canadian authorities and morticians examine Cotten’s remains. No one is buying this horrifying story.

One commentator on Reddit summarized the entire fiasco with these comments: “Cotten is having financial troubles at his company, so he travels to India to work on an orphanage? While suffering from Crohn’s he decided to go to India? Gets married and sets up a will within a month of his “death.” Manages to set up a plan ($100k) for his two dogs so that they’re taken care of. Doesn’t think to make sure the nearly $200m his exchange watches is also taken care of.” Reality can be stranger than fiction.

Jesse Powell, the CEO of the Kraken exchange, is incredulous of this entire bizarre affair. He is already on the record for calling the QuadrigaEX episode “extremely suspect”, considering prior financial issues, withdrawal requests, and now a death and a missing password. His latest reaction: “We have thousands of wallet addresses known to belong to QuadrigaCoinEx and are investigating the bizarre and, frankly, unbelievable story of the founder’s death and lost keys.”

In the meantime, the exchange claims to be working diligently in the background to address its obvious liquidity problems. Investors have been advised via the company’s website on its Homepage: “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.”