QUADRIGA INITIATIVE
CRYPTO WATCHDOG & FRAUD RECOVERY PLATFORM
A COMMUNITY-BASED, NOT-FOR-PROFIT
$12 000 000 USD
NOVEMBER 2019
CANADA
EINSTEIN EXCHANGE
DESCRIPTION OF EVENTS
“On November 1, the BCSC applied to the Supreme Court of British Columbia for an order appointing an interim receiver to preserve and protect any assets of Einstein Exchange. The Court granted the application and appointed Grant Thornton Limited as interim receiver. Grant Thornton subsequently entered and secured the premises of Einstein Exchange on November 1.”
"The interim receiver assigned to oversee the company's finances and take control of any remaining assets, Grant Thornton, said in a report Monday that Einstein now has just CA$45,000 (US$34,000) left of CA$16 million-worth (US$12 million) claimed by users of the exchange."
“Grant Thornton Limited was discharged as Interim Receiver of Einstein Capital Partners Ltd., Einstein Exchange Inc., Einstein Law Corporation and Michael Ongun Gokturk pursuant to a Court order that was pronounced on November 18, 2019, a copy of which can be found below under “Court Orders”. A copy of the Interim Receiver’s First Report to Court, dated November 14, 2019, can be found below under “Court Reports”.”
“Gokturk attributed the losses to frauds with credit cards and bank drafts. He said that the majority of the loss was in cryptos.” "It was just madness," said Michael Gokturk, co-founder of the Einstein Exchange.
The small team at Einstein boasted "300,000 satisfied customers" on their website, and continued to take on more business through mounting withdrawal delays posted across social media.
Among the great features of this exchange was the ability to quickly convert credit card purchases and bank drafts into cryptocurrency which could then be withdrawn immediately, which was a hit among investors and fraudsters alike. In the boom periods in 2017, the company struggled to keep up with all the activity, and it seemingly failed to realize the massive shortfall which was developing over time.
Given that obscurity is the industry norm, nobody expected any visibility into the finances, or that any audits should be done. It seems like the company did their best to honour the withdrawals of those who desperately needed the money for as long as they could before the whole situation met its ultimate end and the masks came off on Halloween 2019.
At least victims were spared the stress of a long and gruelling bankruptcy - there were no assets left.
HOW COULD THIS HAVE BEEN PREVENTED?
The structure of Einstein was such that fraud was able to continue for much of it's existence without any critical reflection on what policies and processes might be done differently.
Were there any form of audit or Proof of Reserve process in place, it would have been apparent to everyone that problems were mounting years before they reached the point of closing the doors with $16m CAD$ lost.
Canada's Einstein Exchange No Longer Has Bulk of Users' Claimed CA$16M: Receiver - CoinDesk (Feb 8)
Q4 2019 Cryptocurrency Anti-Money Laundering Report - CipherTrace (Feb 12)
BCSC acts to protect customers of Einstein Exchange crypto-asset trading platform (Mar 21)
Affidavit of Sammy Wu (Mar 21)
Court-appointed receiver of Einstein Exchange concludes its duties (Mar 21)
Einstein Exchange | Complaints | Better Business Bureau® Profile (Mar 21)
Ex-Employee on the Collapse of Einstein Exchange : einsteinexchange (Mar 21)
Questions About Einstein Exchange : einsteinexchange (Mar 21)
Canada’s Einstein Exchange shuts down — and all the money’s gone | Attack of the 50 Foot Blockchain (Mar 21)
Creditor updates | Grant Thornton LLP (Mar 21)
Crypto trading platform Einstein Exchange shuts down, owing $16 million to clients | BetaKit (Mar 21)
Cryptocurrency exchange swamped by 'madness' of cybercash craze (Mar 21)
Who's getting sued: March 16, 2020 - Economy, Law & Politics | Business in Vancouver (Mar 21)
