QuadrigaCX exchange platform and Cryptocurrency market loss

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QuadrigaCX exchange platform, a Canadian cryptocurrency company, can no longer access $ 250 million from its customers because of the death of its founder, who had the only password to recover the money. Client funds are stored in encrypted devices that Gerald W. Cotten’s widow cannot access. Cryptocurrency market loss due to digital coins placed on a microprocessor.

A cryptocurrency market loses $ 250 million after the sudden death of its founder

The company announced an affidavit presented to the Supreme Court of Nova Scotia on January 31. The document contains a sworn statement from Jennifer K. Robertson, the widow of QuadrigaCX exchange platform founder and former CEO, Gerald W. Cotten.

Robertson explains that her late husband succumbed suddenly to complications from Crohn’s disease last December. Mr. Cotten had the only encryption key to access the money invested by QuadrigaCX users.

A question of encryption

QuadrigaCX exchange platform allows you to buy cryptocurrency using real funds deposited in a virtual account. The company holds both cryptocurrencies and currencies belonging to its customers, which it kept for them in the manner of a bank.

quadrigacx exchange platform

To protect this money from hackers, Mr. Cotten deposited the funds into what is known as a “cold wallet,” which is encrypted off-line support (usually a specialized electronic device). Cold wallets are used to store these cryptocurrencies safely while waiting for online transactions. This method is prevalent in the field of virtual currency, where theft of piracy cryptocurrency is a real threat.

However, cold portfolios are well protected by data encryption. They are complicated, if not impossible, to decipher without the right password. Gerald W. Cotten would have taken this password with him in his death, according to what his widow said.

$ 250 million outstanding

Robertson says she owns her deceased husband’s laptop, but the computer is encrypted. And an expert has not been able to bypass the encryption so far.

The 115,000 customers of the company could therefore never again have access to their funds. Among which about 26,500 bitcoins (119 million dollars).

At the beginning of 2018, QuadrigaCX had other problems, while Banks froze $ 26 million due to irregularities in the processing of transfers. They alleged in the Ontario Superior Court that $ 67 million had been improperly transferred to the account of Costodian Inc. This company was dealing with QuadrigaCX exchange platform for transaction processing.

Mr. Cotten’s company had refrained from acting illegally and had in turn accused CIBC of targeting it because of cryptocurrency market concerns.

Unsubstantiated rumors

At the time of his death, Gerald W. Cotten was in India, where he was working to open an orphanage for children in need, according to QuadrigaCX on Facebook.

Mr. Cotten’s sudden death and fundraising problems sparked rumors that the QuadrigaCX CEO would have orchestrated his death to flee with the money. His widow, however, provided the death certificate of Gerald W. Cotten, and Global Affairs Canada confirmed to CBC that a Canadian had indeed died in India, but could not give more details because of the Protection Act.

QuadrigaCX’s lawyer, M. Chiasson, asks a Halifax judge for 30 days to recover some $ 250 million from his clients who are inaccessible due to death from its founder who held the only password to recover the money.

QuadrigaCX exchange platform’s case

The approach of M. Chiasson is mostly to save time. But also to protect the company from any new lawsuit while its leaders are trying to recover or reintroduce the password that allows access to these funds.

On its website, QuadrigaCX indicates to its clients that it has requested protection from its creditors. And that the court will be asked to appoint a controller to oversee the procedures that must lead to the release of the funds.

In an affidavit filed on January 31 at the Supreme Court of Nova Scotia, Jennifer KM Robertson, the widow of QuadrigaCX exchange platform founder and former CEO Gerald W. Cotten, explains that her late husband suddenly succumbed to complications related to Crohn’s disease last December.

However, Cotten had the only encryption key to access the money invested by QuadrigaCX users. “It’s amazing to see how the company relies on one person to manage funds daily,” says Nick Chong, director of the Liquid.com cryptocurrency platform for North America.

What does competitors?

“We, too, operate a cryptocurrency platform like QuadrigaCX exchange platform, and we are not the only one who has access to these funds,” says Chong. We have a quorum system to access funds, and they are funds that belong to our clients, not us. So these are funds that are in trust that we have to manage with some responsibility. ”

There are four, five or six people who have the access codes and you need a quorum of two or four people to access the accounts. Liquid.com cryptocurrency market platform manager for North America, Nick Chong.

At the time of his death, Gerald W. Cotten was in India, where he was working to open an orphanage for children in need, according to QuadrigaCX on Facebook.

His widow provided the death certificate of Gerald W. Cotten, and Global Affairs Canada confirmed to CBC that a Canadian had indeed died in India, but could not give more details because of the Protection of Human Rights Act. Personal information.

QuadrigaCX exchange platform

It allows buying cryptocurrency with real funds deposited in a virtual account.

The company, therefore, owns both cryptocurrencies and currencies belonging to its customers, which it held for them in the manner of a bank, until it no longer has access to its funds.

Cryptocurrency is a virtual currency that is given a value. It is bought, and it is exchanged like any other fiduciary money, it is the same principle.

“There are two types of cryptocurrency storage: the hot wallet and the cold storage. In the first case, current cash can be withdrawn from the online platform. This is roughly the equivalent of the ATM for conventional currency.

The second type of storage is the equivalent of a safety deposit box at the bank. While you need a key to open the box at the bank, you need a password this time to get access to your money. “That’s what’s missing now in the case of Gerald Cotten. That’s what will start the vault.

Investors could never see their money, which could sleep in cyberspace for a while.

115,000 customers concerned

The freeze or loss of the $ 250 million has sidelined many of its clients. Including the Vancouver Stock Exchange, which owes $ 70 million in foreign currency and $ 180 million in the cryptocurrency market to about 115,000 users.

The court documents also tell us that QuadrigaCX exchange platform faced liquidity problems over the last year. Which led CIBC to freeze nearly $ 26 million of QuadrigaCX capital.

Can it be a criminal investigation on this? Because it is still $ 250 million lost. CIBC – the Canadian Imperial Bank of Commerce, brought the case to the Ontario Superior Court. According to the Bank, QuadrigaCX exchange platform illegally transferred $ 67 million into an account of Costodian Inc. It’s a company that dealt with QuadrigaCX for transaction processing.

Gerald W. Cotten had refrained from acting illegally and had, in turn, accused CIBC of targeting him because of cryptocurrency market concerns.

The opinion of Nick Chong, CEO of Liquid.com

Chong says that Japan, where his company is based, has the most robust crack currency regulation and that other countries should use it to protect investors. “In Canada, there is only Quebec that has legislated on cryptocurrencies. And this law only protects against money laundering,” says Chong. So that does not ensure the security of the funds or the way these cryptocurrencies are managed. ”

Japan is segregating funds. This means that the working capital of the company – both in hard currency and in the cryptocurrency market – must be separated from funds belonging to our clients.

Besides, cryptocurrency market companies must undergo an audit of their books. “Our auditor comes to our offices every three months to verify that the funds – both in hard currency and cryptocurrency – that belong to our customers are still there and that everything is in balance,” he says.

Hence Mr. Chong believes that such regulation is necessary to protect investors and for cryptocurrency to receive the recognition of governments.

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