Canadian Cryptocurrency Exchange Loses Access to Cold Wallet

The controversial cryptocurrency exchange QuadrigaCX is, according to court documents, locked out of millions of dollars worth of digital assets it currently owes its customers, as its CEO passed away late last year, him being the only one able to access them.

Exchange Loses Access to Cold Wallets

Citing a creditor protection filing from the Nova Scotia Supreme court, the firm has been unable to locate or access the funds since CEO Gerald Cotten passed on Dec. 9, which resulted in a liquidity crisis at the exchange. As a result, QuadrigaCX filed for creditor protection in compliance with the Companies’ Creditors Arrangement Act (CCAA) on Feb. 1.

QuadrigaCX reportedly had 115,000 users, to which it owes an estimated CA $260 million ($198 million). Reportedly, it only has access to CA $375,000 ($286,000) in cash.

The exchange kept most its assets in cold wallets, which are secured by digital security keys in order to protect them from hacking and theft. With Cotten’s passing the company is now unable to access the cold wallets and the digital assets might be forever lost.

The exchange holds roughly 26,500 Bitcoin, 11,000 Bitcoin Cash, 11,000 Bitcoin Cash SV, 35,000 Bitcoin Gold, nearly 200,000 Litecoin and about 430,000 Ether.

Auditing firm Ernst & Young has been appointed as an independent third party to monitor the proceedings. A filing from Ernst & Young reportedly states,

“Quadriga was unable to access the cold wallets and/or discovered that the cold wallets contained minimal cryptocurrency units.”

User Funds Lost

Users of the platform, some of whom were already unable to withdraw funds due to a legal battle between the exchange and a major Canadian bank, took to Twitter and Reddit following an announcement of Cotten’s passing. Some users asked for proof of death or an obituary, as there have been allegations of a scam exit by the founder.

The widow of the QuadrigaCX founder, Jennifer Robertson, has filed a sworn affidavit with the Nova Scotia Supreme Court, where she requests assistance to preempt any lawsuits that might be filed. According to her statement this could impede the exchange recuperate some of the funds lost by selling its operating platform.

Robertson’s affidavit also states,

“There have also been threats made against [her]. “Slanderous comments have been made against [her] and sent through Facebook messenger to [her] entire contact list.”

Robertson is reportedly funding the creditor protection motion herself and a preliminary hearing has been set for Feb. 5.