QuadrigaCX Bankruptcy

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QuadrigaCX

This is one of the best known cases in Canada. QuadrigaCX became known through the Vancouver bitcoin community, and was one of the first exchanges to be FINTRAC registered as a valid money services business. Gerald Cotten was well known and even had regular office hours early in QuadrigaCX history. Quadriga was at one point pursuing public listing on the Toronto Stock Exchange. While other firms went bankrupt and folded, QuadrigaCX was able to continue operating for 6 years, even occupying 80% of the market at one point.

QuadrigaCX's success was the result of a few factors. Firstly, being able to spend customer funds for growth and marketing provides a competitive advantage over other firms. Gerald Cotten was exploiting the legal gray area in operating the platform, where other firms would not dare enter for fear of being shut down and losing all invested capital. Finally, by getting in early, QuadrigaCX had a strong advantage over other firms in the space.

This exchange or platform is based in Canada, or the incident targeted people primarily in Canada.[1][2][3][4][5][6][7][8][9][10][11][12][13][14][15][16][17][18][19][20][21][22][23][24][25][26][27][28][29][30][31]

About Gerald Cotten

"Cotten was a computer nerd who had entered the right business at the right time and succeeded beyond his wildest dreams. The broad outlines of his story were blandly conventional, at least if you subtracted his interest in decentralized monetary systems. He grew up in a large brick house on a quiet suburban street in Belleville, “The Friendly City,” a waterfront community between Toronto and Montreal best known for its cheddar cheese. In 2010 he graduated with a bachelor’s degree in business administration from an honors program at York University’s Schulich School of Business in Toronto. His parents owned an antiques store; Cotten decided to go into crypto."

About QuadrigaCX

"In April 2013, around the time that Cotten appeared in Vancouver, the price of a Bitcoin had risen to $266. But it was not easy to buy or sell if you lacked technological sophistication and considerable patience. Seventy percent of the global Bitcoin trade was conducted through Mt. Gox, a Tokyo-based exchange, and had to be funded by sending a bank wire to Japan." "In November 2013 Cotten and an older business partner, Michael Patryn, an authority on currency trading with passions for Brazilian jujitsu and luxury automobiles, incorporated the Quadriga coin exchange, or QuadrigaCX." "In a small, inefficient market, Quadriga swiftly distinguished itself." "QuadrigaCX initially attracted users because it seemed less risky than other bitcoin trading platforms. It had been licensed by FinTRAC, the Canadian anti-money-laundering task force, and Cotten often told reporters that the fact that the exchange was based in Canada meant that investors “know where their money is going.”"

“If you recall, back in the summer of 2013, there really weren’t many options here in Canada for people to buy and sell bitcoins…There was one exchange [Cavirtex] that was pretty much leading the pack….and then, other than that, you pretty much had to send a wire over to Japan [a reference to now-defunct bitcoin exchange Mt. Gox], if you wanted to buy Bitcoin…. You couldn’t hook up your bank account anywhere. It was just such a challenge.”

"Cotten’s efforts to win the trust of Bitcoin enthusiasts relied on his reputation in Vancouver, where he had become a director of the Bitcoin Co-op. He began to host the weekly meetups at Quadriga’s office. Quadriga sponsored local Bitcoin conventions and educational events, investments of $500 or $1,000 that yielded incalculable goodwill. Often Quadriga was the only Bitcoin company willing to pay for a sponsorship. “From our perspective, we needed Quadriga,” says Andrew Wagner, who at the time was the co-op’s director of public relations. “Without them, our events would have stopped. It put us in a particular place of need.”"

"In February 2014, six weeks after Quadriga launched, Mt. Gox abruptly suspended operations, claiming that hackers had stolen $473 million from customer accounts. A year later, Canada’s largest exchange, CaVirTex, announced its closure, also blaming hackers; the second-largest exchange, Vault of Satoshi, closed the same week. Overnight, Quadriga became Canada’s dominant Bitcoin marketplace. The following year it launched a bid to be listed on the Canadian stock exchange, submitting to a full financial audit. “We’re excited,” said Cotten at the time, “to be able to provide an unparalleled level of transparency.”"

In February 2015, "Unable to grow the company organically, Cotten and Patryn push forward with a plan to take Quadriga public. They raise $850,000 CAD in capital from Canadian brokerage houses Haywood Securities, Jordan Capital Markets, PI Financial, and Wolverton Securities." "Cotten ultimately abandoned the effort after a dispute with one of the major investors. Quadriga’s entire board resigned, leaving Cotten as Quadriga’s only full-time employee. Despite additional travails—a software glitch that lost C$14 million, a cease-trade order from the British Columbia Securities Commission after Cotten failed to file an audit, and CIBC’s seizure of C$21 million from one of its payment processors after the bank failed to determine its rightful owner—Quadriga profited wildly from Bitcoin’s giddy rise."

"Cotten is said to have operated the exchange from his MacBook, and while reports indicate he’d set a “dead man’s switch” that would forward access to the cryptocurrency keys required to handle up to $250 million worth of customer funds still in play, Cotten’s sudden disappearance has left users entirely out-of-pocket." “The normal procedure was that [QuadrigaCX founder and CEO Gerald Cotten] would move the majority of the coins to cold storage as a way to protect the coins from hacking or other virtual theft.” "Cotten, who appears to have overstated the company’s revenue, according to the auditors, reportedly juiced the volume of trades on the platform by creating fake accounts and using them to trade counterfeit bitcoin for real cash and cryptocurrency."


This exchange or platform is based in Canada, or the incident targeted people primarily in Canada.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

  • Known history of when and how the service was started.
  • What problems does the company or service claim to solve?
  • What marketing materials were used by the firm or business?
  • Audits performed, and excerpts that may have been included.
  • Business registration documents shown (fake or legitimate).
  • How were people recruited to participate?
  • Public warnings and announcements prior to the event.

Don't Include:

  • Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
  • Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

Early Interview With Gerald Cotten

An early interview with Gerald Cotten published by The Georgia Straight[32].

How would you explain, very briefly, Bitcoin to a newbie?

To a newbie, I would describe it as a decentralized, peer-to-peer payment system. It basically allows you to send payments from one user to another without the need of a central authority, such as a bank.

What’s the easiest way to get bitcoins in Vancouver?

The easiest way to get bitcoins in Vancouver is, in my opinion, our ATM, because you just walk up to it, scan your QR code, and within five seconds you’ll have the bitcoins in your Bitcoin wallet.

What sets your online currency exchange apart from the others in Canada?

There’s a few other Bitcoin exchanges in Canada. What mainly sets ours apart is the fact that we charge no fees right now. It’s a promotional thing. In addition to that, we have more account funding options and withdrawal options than any exchange in the country.

One of our main features is Interac Online. It allows any user to fund their account instantly. So, you can actually, from the comfort of your own home, fund your Quadriga CX account through your online banking with Interac Online and buy bitcoins instantly. It’s the fastest way to get bitcoins in Canada.

What are your plans for your Bitcoin ATMs in Vancouver?

The plan with the ATMs is they’re going to be hooked up to our exchange. So, if someone makes a purchase from our ATM, it makes an equivalent trade on our exchange, which basically refills the ATM instantly. Our plan is to spread our ATMs around Vancouver and not just Vancouver—around the country. Because in addition to those three that are coming in about a week, we have an additional large order with Lamassu, where we’ll be spreading the ATMs basically across Canada. We want to spread Bitcoin across the country and basically make buying bitcoins easier for the average Canadian.

The federal government mentioned Bitcoin in its budget this week. How would you like to see cryptocurrencies regulated in Canada?

At this point, I’d like to see a little more clarity from our governmental institutions. Right now, if you contact FINTRAC [Financial Transactions and Reports Analysis Centre of Canada] and ask them about Bitcoin, they’ll basically tell you that Bitcoin is not currently regulated by the government and that they’re unable to provide you with any additional information.

From an exchange point of view, this is quite frustrating, because you’re trying to figure out what the regulations are. We’re quite proactive when it comes to regulations. We don’t want to break the law. We want to fully comply, and we actually more than comply with what the current laws are. So, a bit more clarification from FINTRAC and from the federal government would be very useful—just in terms of planning our business for the future.

What other cryptocurrencies aside from Bitcoin have your attention?

Litecoin is interesting—just because it seems to be pretty much the second largest cryptocurrency.

In addition to that, Dogecoin has been getting a lot of media attention. So, we’re actually adding Dogecoin to our website within the coming weeks. It seems to have a huge amount of community support. It’s very popular on Reddit, and because of that reason it’s caught my attention.

The Reality

"Though the 30-year-old died in December 2018, according to his widow, it took more than a month for the cryptocurrency exchange to publicly reveal that he had passed away." "Just four days before the trip, the magazine noted, Cotten had written a will." "The Canadian crypto exchange announced on Jan. 14, 2019, that CEO Gerald Cotten had died while on honeymoon in India with his wife, Jennifer Robertson." "[C]ondolences flooded in from around the world. As the company explained, the 30-year-old had been nine days into his honeymoon in India, where he planned to open an orphanage, when he suddenly collapsed because of complications of Crohn’s disease." "But before long, the words of support and sympathy were replaced by panicked messages from investors: Where was their money?" "The deceased head of the exchange did not create any backup to recover the passwords of the exchange’s stored digital assets, resulting in the lockdown of cryptocurrency worth millions."

"When the company finally came clean and users scrambled to withdraw their money, QuadrigaCX’s website went dark." "In a sworn affidavit filed Jan. 31 with the Nova Scotia Supreme Court, Jennifer Robertson, identified as the widow of QuadrigaCX founder Gerald Cotten, said the exchange owes its customers roughly $250 million CAD ($190 million) in both cryptocurrency and fiat. The company previously announced it had filed for creditor protection on its website, but the filing itself provides greater details about its predicament." “The laptop computer from which Gerry carried out the companies’ business is encrypted and I do not know the password or recovery key,” Cotten’s widow, Jennifer Robertson, said in court filings, according to the Guardian. “Despite repeated and diligent searches, I have not been able to find them written down anywhere.”


This sections is included if a case involved deception or information that was unknown at the time. Examples include:

  • When the service was actually started (if different than the "official story").
  • Who actually ran a service and their own personal history.
  • How the service was structured behind the scenes. (For example, there was no "trading bot".)
  • Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

"QuadrigaCX collapsed in 2019, leaving more than 76,000 investors from Canada and around the world collectively out-of-pocket for at least $169 million. Following a 10-month investigation, the OSC released a report stating that the crypto company was a Ponzi scheme." "Citing a creditor protection filing from the Nova Scotia Supreme court, the Globe and Mail states that the firm has been unable to locate or access the funds since Cotten passed on Dec. 9, leading to a liquidity crisis at the exchange. QuadrigaCX filed for creditor protection in compliance with the Companies' Creditors Arrangement Act (CCAA) on Feb. 1."

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - QuadrigaCX Bankruptcy
Date Event Description
November 2013 QuadrigaCX Founded The company is founded[33]. The exchange first starts with conducting local trades of cash for bitcoin

[32].

December 2013 Exchange Launches The Quadriga coin exchange itself launches[33][34] with a staff of just 5[32].
January 30th, 2014 QuadrigaCX Launches Vancouver Bitcoin ATM QuadrigaCX launches a bitcoin ATM in Vancouver, which is only Vancouver's second bitcoin ATM, which is a Lamassu Bitcoin Machine that cost $5,000[32]. The exchange leaves "beta"[32].
February 14th, 2014 10:10:00 AM MST The Georgia Straight Article The Georgia Straight (Vancouver Free Press) publishes an interview with Gerald Cotten. The article highlights the recent bitcoin ATM launched. It states the company is expecting to receive 3 more ATMs "in a week or so". It provides an address of 332 Water Street in Gastown for the exchange headquarters, and indicates that Gerald Cotten will be at an art and trade show on Saturday and a currency and commodity exchange which is part of an event called CoinFest[32].
February 15th, 2014 4:00:00 PM MST Gerald Cotten At CoinFest Gerald Cotten is attending the CoinFest in Vancouver, first an art and trade show at the Vancouver English Centre, followed by the currency and commodity exchange at the Doolin's Irish Pub[32][35].
March 14th, 2015 5:05:37 PM MDT Quadriga Fintech Solutions Website Live The first capture is taken of the Quadriga Fintech Solutions website, which provides a glimpse of the corporate entity public face. It provides details on the trading platform, merchant services, and remittance solutions they offer as "the leader in cryptocurrency solutions"[36].
March 2015 Move To Go Public The parent company Quadriga Fintech looks at taking QuadrigaCX public, but nothing materializes[33].
March 15th, 2015 7:59:33 PM MDT Quadriga Fintech Solutions Corporate Profile A capture of the corporate profile of Quadriga Fintech Solutions. It highlights the online trading platform, the "first bitcoin exchange in Canada to be licensed by FinTRAC". According to this description, the exchange also supported "gold bullion", Quadriga is offering merchant payment processing systems for businesses to accept bitcoin, and they are in negotiations with two online casinos to become their "sole bitcoin processing merchant platform". Finally, Quadriga utilizes "the technologyy of the bitcoin blockchain" to provide a remittance service for Mexico and the Carribbean[34].
February 29th, 2016 Director Resignations Anthony Milewski and Lovie Horner resign[33]. (TBD follow links.)
March 8th, 2016 BCSC Cease Trade Order The British Columbia Securities Commission issues a cease trade order, since no audited financial statements were recieved[33].
March 18th, 2016 More Resignations Director Bill Filtness and CFO Natasha Tsai both resign. This leaves Gerald Cotten as the sole executive.[33]
June 2017 Smart Contract Funds Locked $14m worth of Ethereum is lost in a smart contract error[33].
January 2018 Financial Difficulties Begin Verdict attributes without details to financial difficulties starting at this month[33].
March 2018 Experiencing Delays For Months Verdict reports that this is when customers have been first revealing that they've been experiencing delays for months[33]. TBD[37]
April 2018 Delays Due To Canadian Bank Dispute QuadrigaCX publicly declares that the cash out delays are related to disputes with Canadian banks[33]. TBD[38]
October 2018 CIBC Fund Dispute Underway QuadrigaCX disputes a $19.6m sum with the Canadian Imperial Bank of Commerce (CIBC). The CIBC says it is unable to determine the real owners of the funds. Canadian newspaper the Globe and Mail reports that QuadrigaCX has been experiencing difficulties accessing $16.3m of its fund since January 2018[33].
November 9th, 2018 Ontario Superior Court Favours CIBC In Ruling The Ontario Superior Court rules in favour of CIBC, saying that owner of the $19.6m funds is unclear[33]. TBD[39]
November 27th, 2018 Gerald Cotten Writes Will Gerald Cotten files a will that leaves all his assets to his wife, Jennifer Robertson, naming her as the sole benefactor and executor to his estate[33].
December 9th, 2018 Gerald Cotten Allegedly Dies Co-founder of QuadrigaCX Gerald Cotten, allegedly the only one with access to the private keys, dies at age 30 while honeymooning in India[33][40][41]. The company reports he was building an orphanage in India[33].
January 14th, 2019 Formal Announcement Released A formal announcement is posted that the QuadrigaCX founder has died[33]. Further Reddit posts indicate that users are having trouble accessing their funds. TBD[42][43]
January 15th, 2019 Platform Shutdown The time of platform shutdown, according to Bitcoin Magazine[40].
January 28th, 2019 Offline For Maintenance The QuadrigaCX website goes offline for maintenance[33].
January 31st, 2019 Affidavit Filed In Nova Scotia Court An affidavit is filed in a Nova Scotia Supreme Court by Jennifer Robertson, stating that Gerald Cotten was the only one with access to the laptop cold storage which is believed to contain around $137m in cryptocurrencies. QuadrigaCX files for creditor protection[33]. TBD[44][45]
February 4th, 2019 MyCrypto No Ethereum Cold Wallet Founder and CEO of non-custodial wallet MyCrypto raises the possibility that there may not have been an Ethereum cold wallet at all[33]. TBD[46]
February 5th, 2019 CCAA Process Started An Indian government-issued death certificate appears to corroborate QuadrigaCX’s statement, but the certificate misspells ‘Cotten’ as ‘Cottan’. Canadian Apex Court appoints Ernst & Young to investigate the lost funds during a preliminary hearing. Research conducted by the editor of blog Zerononcence cannot find evidence for the existence of a QuadrigaCX Bitcoin cold wallet[33]. TBD[47][48][49]
February 6th, 2019 Creditor Protection Granted The Canadian Supreme Court grants QuadrigaCX a court order for creditor protection, giving the exchange 30 days of initial protection from its creditors while it comes up with a ‘Plan of Arrangement’[33].
February 22nd, 2019 Brian Armstrong CoinRivet Article A CoinRivet article is published where CoinBase CEO Brian Armstrong provides some theories as to what's happened with QuadrigaCX, namely that the platform is using the death to obfuscate missing funds[50]. The Tweet has since been deleted[51] and the URL of the original Tweet has been excluded from the Internet Archive[52].
February 27th, 2019 Kyle Gibson Mention Kyle Gibson publishes his timeline, and includes QuadrigaCX with a total loss of $145m[53].
April 9th, 2019 Bankruptcy Declaration [54] (TBD).
April 10th, 2019 Liberty Reserve Link An article is published which links Gerald Cotten and Michale Patryn to a Liberty Reserve intermediary Midas Gold, which had it's domain seized just months before QuadrigaCX was launched[55][56]. (TBD)
April 11th, 2019 Termination and Bankruptcy Assignment Order "n April 11, 2019, the Supreme Court of Nova Scotia issued a Termination and Bankruptcy Assignment Order outlining the process by which the Quadriga CCAA proceedings will be converted to bankruptcy proceedings under the Bankruptcy and Insolvency Act

[1]"

April 16th, 2019 Conversion To Bankruptcy Announced The conversion from a CCAA proceeding to a bankruptcy process is announced on the trustee website[1].
May 1st, 2019 TheNextWeb Article The QuadrigaCX bankruptcy is included in TheNextWeb's article. This references $190m lost[57].
May 8th, 2019 BitcoinExchangeGuide The loss amount is published by BitcoinExchangeGuide at $145,000k[58][59].
May 24th, 2019 Bitcoin Magazine Publication Bitcoin Magazine publishes an infographic covering various exchange compromise events, including QuadrigaCX[40].
November 7th, 2019 CrowdFundInsider Article The QuadrigaCX situation is referenced in the CrowdFundInsider article about EZ-BTC[60].
December 13th, 2019 Exhumation Requested Miller Thompson, representative counsel of QuadrigaCX affected users, sends a letter to the RCMP requesting that Gerald Cotten's body be exhumed by spring (given decomposition concerns)[41].
May 8th, 2020 12:13:57 AM MDT CipherTrace Q4 Publication Blockchain analytics firm CipherTrace released a Q4 2019 report, which features coverage of QuadrigaCX. It lists losses as US $200m, calls the exchange "scandal-ridden", references a massive international investigation, mentions the request to exhume the body[41][61],

Technical Details

Total Amount Lost

Various sources have reported different amounts for the total lost.

Sources Reporting The Loss Amount
Source Date Amount Cryptocurrency Total
Verdict.co.uk[33] Feb 6th, 2019 "around $137m" "around $190m"
Kyle Gibson[53] Feb 27th, 2019 $145,000,000
CipherTrace[41] "almost US$200 million"
TheNextWeb[57] May 1st, 2019 $190,000,000
BitcoinExchangeGuide[58] May 8th, 2019 $145,000k
Bitcoin Magazine[40] May 24th, 2019 $190,000,000

The total amount lost has been estimated at $215,000,000+ USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

"[O]n Feb. 6, Quadriga “inadvertently transferred” certain cryptocurrency into cold wallets that the company is unable to access." "Ernst & Young said in its second report that it has confirmed that the insolvent company’s cold-storage, or offline wallets, continue to hold approximately 104 bitcoins. It had said that 103 bitcoins had been transferred out on Feb. 6." "The court-appointed monitor overseeing the search for the roughly $260 million owed to clients of the embattled QuadrigaCX cryptocurrency exchange says the bitcoin transfer it “inadvertently” made this month was due to a “platform setting error” that prompted the automatic transaction."

"The ruling by Nova Source Supreme Court Judge Michael Wood means that QuadrigaCX, which has been operating under the Companies’ Creditors Arrangement Act (CCAA) since the end of January, will file for bankruptcy, entering what is likely to be the final chapter in the exchange’s history." "Please be advised that on April 11, 2019, the Supreme Court of Nova Scotia issued a Termination and Bankruptcy Assignment Order outlining the process by which the Quadriga CCAA proceedings will be converted to bankruptcy proceedings under the Bankruptcy and Insolvency Act. A copy of the Termination and Bankruptcy Assignment Order is accessible via this link." "The transition to bankruptcy will give EY, which will become the exchange’s trustee, greater investigative powers over the company’s missing funds, as well as allow it to begin selling off assets such as its trading platform, which could generate some revenue to make its customers whole."

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

"The FBI began looking into the Canadian exchange in March last year, some three months after its CEO Gerald Cotten is said to have died in India due to complications related to Crohn’s disease." "Correspondence published by the outlet reveal that an FBI victim specialist has emailed former QuadrigaCX users, directing them to an online portal they can use to obtain more information." “As a Victim Specialist with the FBI – Albany, I’m contacting you because we have identified you as a possible victim of a crime,” “The enclosed brochure introduces you to the FBI‘s Victim Assistance Program and the types of assistance that may be available to you,”

"Miller Thomson LLP, the Toronto firm appointed to represent QuadrigaCX users, requests that the Royal Canadian Mounted Police also conduct an autopsy on Cotten’s body, “to confirm both its identity and the cause of death.” Citing the “questionable circumstances” surrounding Cotten’s sudden passing, the attorneys note “the need for certainty around the question of whether Mr. Cotten is in fact deceased.""

"The Ontario Securities Commission has spent 10 months investigating what happened to the Quadrigacx cryptocurrency exchange." "The downfall of crypto asset trading platform Quadrigacx (Quadriga) resulted from a fraud committed by Quadriga’s co-founder and CEO Gerald Cotten." “Clients entrusted their assets to Quadriga, which provided false assurances that those assets would be safeguarded,” reads the OSC report. “In reality [Gerald Cotton, Quadriga’s co-founder and CEO] spent, traded and used those assets at will.” "Cotten covered this shortfall with other clients’ deposits. In effect, this meant that Quadriga operated like a Ponzi scheme." "Another $28 million was lost when Cotten used client assets on three external crypto asset trading platforms without authorization or disclosure." "Under normal circumstances, these findings would likely have led to an enforcement action against Cotten and/or Quadriga. However, this is not practical given that Cotten is deceased and Quadriga is bankrupt, with its assets subject to a court-supervised distribution process. Nevertheless, we believe it is in the public interest to share our findings with the public to help investors understand what happened to Quadriga and hopefully prevent this type of situation from recurring."

"Notably, the Canadian tax authorities are also probing the doomed exchange for failing to pay corporate taxes." "First reported by The Globe and Mail on Monday, the Canadian tax authority is looking into the tax returns of the defunct exchange from between October 1, 2015, to September 30, 2018." "In March, the CRA collected a vast trove of documents from EY, and there’s no telling how long that will take to dig through, especially given current circumstances." “The CRA did not confirm a timeline of when the CRA Audit will be completed given the COVID­19 pandemic,” the law firm said.

"Lawyers representing creditors of the collapsed exchange QuadrigaCX have hired blockchain forensics specialists to help with the ongoing investigation." "In a notice to creditors on Sept. 8, Miller Thomson said that Kroll will be working in collaboration with its strategic partner, Coinfirm, which specializes in blockchain forensics and anti-money laundering (AML) compliance." "Kroll, a division of New York-based financial consultancy firm Duff & Phelps, will not be tackling the project alone, however. It is joining forces with Coinfirm, a London-based blockchain analytics firm. Kroll will receive up to $50,000 USD for their efforts. And EY has provided a contractual indemnity of up to $150,000 USD—three times the professional fees—to protect Kroll from any lawsuits or negligence claims."

"The trustee for the collapsed Canadian crypto exchange QuadrigaCX has received $171 million in claims from the exchange’s customers." "In a Nov. 6 update filed with the Ontario Superior Court of Justice, EY revealed it has received 17,053 claims from customers who had entrusted their funds with the Canadian exchange." "The former users of the exchange are filing claims for digital assets including Bitcoin, Bitcoin Cash, Bitcoin Gold, Bitcoin SV, Ethereum, and Litecoin, along with Canadian dollars and US dollars." "EY said it wants to settle Quadriga users' crypto claims as of prices on April 15, 2019 — the date on which the exchange declared bankruptcy." "Cryptocurrency has been recognized as “property” for the purposes of the Bankruptcy and Insolvency Act by the Ontario Superior Court of Justice (Commercial List) in Re Quadriga Fintech Solutions Corp. et al.,[1] the first Canadian case of its kind. The Court also fixed the date of bankruptcy as the date for valuing claims denominated in cryptocurrency." "The Trustee is requesting an order of the Court to establish the currency conversion rates by which U.S. dollar and cryptocurrency claims will be converted into Canadian dollars for claim distribution purposes. The specific Date of Bankruptcy (April 15, 2019) rates that the Trustee intends to use are set out in the...chart."

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

"So far, EY has located $35 million (CA$46 million) to pay out to creditors. The amount represents a fraction of the total $190 million (CA$246 million) that went missing when the exchange went belly up early last year." "Two things have to happen before those claims can be filled. The first is that EY has to review each claim individually, and that takes time and money." "But the bigger holdup by far is that the Canada Revenue Agency needs to complete its audit of Quadriga’s tax liabilities, said Miller Thomson." "EY has not set any deadline for distributing the amount to the affected users."

General Prevention Policies

The collapse of QuadrigaCX is trivial to prevent. Funds were not stored offline in general, and no background checks were conducted on anyone with keys. There was no multi-signature wallet. There was no visibility of validation of backing.

Indeed, of the 15 rules in our proposed framework, QuadrigaCX violates every single one of them, and therefore it can be argued that any rule at all would have prevented or dramatically reduced the situation.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.

References

  1. ↑ 1.0 1.1 1.2 QuadrigaCX Trustee Archive June 5th, 2021 12:29:31 PM MDT (May 17, 2021)
  2. ↑ QuadrigaCX: A Review by Staff of the Ontario Securities Commission - QuadrigaCX Report (May 17, 2021)
  3. ↑ QuadrigaCX Users' Law Firm Launches Blockchain Analytics Investigation - CoinDesk (May 17, 2021)
  4. ↑ Quadriga Was a Ponzi Scheme, Ontario Securities Regulator Says - CoinDesk (May 17, 2021)
  5. ↑ Friday update : QuadrigaCX (May 17, 2021)
  6. ↑ Canadian Regulator Unveils the Truth Behind Collapsed Crypto Exchange Quadrigacx – Bitcoin News (May 17, 2021)
  7. ↑ QuadrigaCX Owes Customers $190 Million, Court Filing Shows - CoinDesk (May 17, 2021)
  8. ↑ QuadrigaCX trustee only has $30M to pay $171M worth of claims (May 17, 2021)
  9. ↑ Bankruptcy Court Weighs in on How to Value Bitcoins - Lexology (May 17, 2021)
  10. ↑ QuadrigaCX trustee EY wants to settle users' crypto claims as of April 2019 prices (May 17, 2021)
  11. ↑ quadrigacx – Amy Castor (May 17, 2021)
  12. ↑ FBI contacts users of crypto exchange QuadrigaCX as investigation ramps up (May 17, 2021)
  13. ↑ Nearly 17,000 Creditors Claim Refunds from QuadrigaCX (May 17, 2021)
  14. ↑ Canadian Tax Authority Probing QuadrigaCX's Corporate Tax Returns (May 17, 2021)
  15. ↑ QuadrigaCX: How To Lose $140 Million In An Instant (May 17, 2021)
  16. ↑ Gerald Cotten's body should be exhumed, investors in QuadrigaCX tell court - The Washington Post (May 17, 2021)
  17. ↑ The Secret Life and Strange Death of Quadriga Founder Gerald Cotten | Vanity Fair (May 17, 2021)
  18. ↑ Quadriga Monitor Report 1 (May 17, 2021)
  19. ↑ ‘Platform error’ blamed for BTC being sent to Quadriga’s dead CEO’s cold wallet – Amy Castor (May 17, 2021)
  20. ↑ Court monitor determines QuadrigaCX’s inadvertent transfer due to ‘platform setting error’ | Globalnews.ca (May 17, 2021)
  21. ↑ QuadrigaCX Officially Enters Bankruptcy With Millions Still Missing - CoinDesk (May 17, 2021)
  22. ↑ How the hell did we get here? A timeline of Quadriga events – Amy Castor (May 17, 2021)
  23. ↑ Collapse of Quadriga crypto exchange was ‘old-fashioned fraud wrapped in modern technology’: OSC | Globalnews.ca (May 17, 2021)
  24. ↑ SlowMist Hacked - SlowMist Zone (Jun 26, 2021)
  25. ↑ CBC Podcasts - A Death in CryptoLand (Jun 26, 2021)
  26. ↑ The 23 exchange hacks of 2019 (Aug 8, 2021)
  27. ↑ https://www.bbc.com/news/world-us-canada-47203706?piano-modal (Jan 22, 2022)
  28. ↑ https://www.cbc.ca/listen/cbc-podcasts/904-a-death-in-cryptoland (Apr 23, 2022)
  29. ↑ Netflix Crypto Documentary: QuadrigaCX - Here's My Take!! - YouTube (Apr 30, 2022)
  30. ↑ StopYTCensorship comments on Stolen Ethereum (Sep 12, 2022)
  31. ↑ Why Finding Out QuadrigaCX's Cold Wallet Addresses Are Critical : BitcoinCA (Jan 1, 2023)
  32. ↑ 32.0 32.1 32.2 32.3 32.4 32.5 32.6 Geek Speak: Gerald Cotten, CEO of Quadriga CX - The Georgia Straight (Apr 27, 2023)
  33. ↑ 33.00 33.01 33.02 33.03 33.04 33.05 33.06 33.07 33.08 33.09 33.10 33.11 33.12 33.13 33.14 33.15 33.16 33.17 33.18 33.19 33.20 33.21 QuadrigaCX timeline: Every twist and turn in the bizarre crypto scandal (Mar 7, 2020)
  34. ↑ 34.0 34.1 Quadriga Fintech Solutions Corporate Profile Archive - March 15th, 2015 7:59:33 PM MDT (Apr 28, 2023)
  35. ↑ CoinFest 2014 to celebrate Bitcoin in Vancouver - The Georgia Straight (Apr 27, 2023)
  36. ↑ Quadriga Fintech Solutions Website - Archive March 14th, 2015 5:05:37 PM MDT (Apr 28, 2023)
  37. ↑ https://globalnews.ca/news/4090875/100k-wire-transfer-bitcoin-canada-quadriga-cx/ (Apr 27, 2023)
  38. ↑ https://vancouversun.com/business/local-business/bitcoin-investors-face-long-delays-cashing-out-criticize-two-b-c-firms (Apr 27, 2023)
  39. ↑ https://www.canlii.org/en/on/onsc/doc/2018/2018onsc6680/2018onsc6680.html# (Apr 27, 2023)
  40. ↑ 40.0 40.1 40.2 40.3 Infographic: An Overview of Compromised Bitcoin Exchange Events (Jan 30, 2020)
  41. ↑ 41.0 41.1 41.2 41.3 Q4 2019 Cryptocurrency Anti-Money Laundering Report - CipherTrace (Feb 12, 2020)
  42. ↑ https://www.facebook.com/quadrigacx/posts/2218141444897123 (Apr 27, 2023)
  43. ↑ https://www.reddit.com/r/QuadrigaCX/comments/ag5b9g/days_since_they_claimed_payment_was_sent_out/ (Apr 27, 2023)
  44. ↑ https://www.scribd.com/document/398721572/Jennifer-Robertson-Affidavit#from_embed (Apr 27, 2023)
  45. ↑ https://www.coindesk.com/crypto-exchange-quadrigacx-files-for-creditor-protection (Apr 27, 2023)
  46. ↑ https://www.ccn.com/mycrypto-ceo-quadrigacx-may-not-have-ethereum-cold-wallet-wheres-the-missing-150m (Apr 27, 2023)
  47. ↑ https://www.coindesk.com/indian-death-certificate-crypto-exchange-quadrigacx-death (Apr 27, 2023)
  48. ↑ https://coingape.com/quadrigacx-news-canadian-apex-court-investigate/ (Apr 27, 2023)
  49. ↑ https://blog.zerononcense.com/2019/02/04/quadrigacx-chain-analysis-report-pt-1-bitcoin-wallets (Apr 27, 2023)
  50. ↑ Brian Armstrong believes the QuadrigaCX fiasco may have been an accidental exit scam - Coin Rivet (Mar 7, 2020)
  51. ↑ brian_armstrong - "This page doesn't exist" - Twitter (Apr 11, 2023)
  52. ↑ "This URL has been excluded from the Wayback Machine" - brian_armstrong - Twitter (Apr 11, 2023)
  53. ↑ 53.0 53.1 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents (Jan 25, 2020)
  54. ↑ Canadian Crypto Exchange QuadrigaCX Officially Declared Bankrupt - CoinTelegraph (Apr 3, 2023)
  55. ↑ New documents link QuadrigaCX founders to Liberty Reserve money laundering operation - Messari (Feb 15, 2020)
  56. ↑ New Documents Link QuadrigaCX Founders to Liberty Reserve Money Laundering Operation - BreakerMag (Apr 3, 2023)
  57. ↑ 57.0 57.1 $356 million in cryptocurrency stolen in first three months of 2019 (Feb 15, 2020)
  58. ↑ 58.0 58.1 Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com (Mar 5, 2020)
  59. ↑ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com - Archive (Apr 11, 2023)
  60. ↑ Report: Third Vancouver Crypto Exchange Investigated by BC Securities Regulators (Feb 22, 2020)
  61. ↑ Q4 2019 Cryptocurrency Anti-Money Laundering Report - CipherTrace - Archive (Apr 3, 2023)
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