What happens when the sole person in charge of a Bitcoin exchange suddenly dies? There should be a backup person that knows the passwords and allows the customers to get their funds back. Unfortunately, that was not the case of Quadriga – the largest crypto exchange in Canada. When its owner suddenly died back in December, he took the access passwords to the grave with him.

An Unexpected Death, an Ensuing Debacle

Gerald Cotten, the founder and CEO of Quadriga, was only 30 years old when he died in India from complications of Crohn’s disease. This happened in December and since then his widow and authorities tried in vain to access his laptop. This is the device where Cotten kept the keys for Quadriga’s cold storage wallets. The amount of cryptocurrencies locked inside these wallets are estimated at C$260 million (around £148m; US$190m; AU$275m). The Bitcoin exchange had 115,000 customers at Mr. Cotten’s time of death.

On 31 January 2019, Jennifer Robertson, his widow, gave an affidavit for the Nova Scotia Supreme Court stating that Despite repeated and diligent searches, I have not been able to find them [the passwords to Cotten’s laptop] written down anywhere.

In the meantime, Mrs. Robertson became the chief restructuring officer for the affairs of the Bitcoin exchange. Also, the court appointed the accountancy company Ernst & Young to work on locating the funds of Quadriga’s customers.

Their latest report, issued on 1 March, 2019, adds a darker note to the mystery.

What Ernst & Young Investigator Found: Empty Cold Wallets

Gerry Cotten

The EY specialists managed to identify and access the 6 cold storage wallets created by Cotten before his death (which he used for securing Bitcoin). However, they did not find the customers’ funds in them. Moreover, they identified unusual activity patterns in connection with them. Also, the accountancy firm spotted red flags in 14 user accounts, which were not created according to the usual procedure of the Bitcoin exchange.

At this point, even the US Federal Bureau of Investigations (FBI) got involved in looking after the missing Quadriga funds. The federal agency contacted a US-based crypto exchange, Kraken, asking them to help track the crypto assets.

The Plot Thickens with Rewards and Conspiracy Theories

The CEO of Kraken Bitcoin exchange, Jesse Powell, offered a US$100,000 reward for the tip(s) that best lead to the discovery of the missing $190 million US dollars.

The investigations into the issue revealed that some of the funds held by the Canadian Bitcoin exchange were moved in Ethereum to several exchanges. Another important piece of evidence connected with the case is an estate filing made by Cotten just 12 days before his death. His wife, Jennifer Robertson is the sole beneficiary of his estate.

Conspiracy theories were quick to surface. Some of these claim that Cotten’s widow has changed her names three times so far and spent millions of dollars on property during the last two years. There are even questions around the circumstances of Cotten’s death. Steve Bunnell, a data security analyst at an independent law firm in Los Angeles, CA, stated:

There are still a number of suspicious circumstances around Gerald Cotten’s reported death that need to be looked into. But regardless of whether the custody of crypto on QuadrigaCX was mismanaged or whether there was something more nefarious involved, the situation highlights the importance for customers of dealing with crypto exchanges that are reputable.

Fund Withdrawal Issues Prior to the Collapse of the Bitcoin Exchange

Other stories come from Quadriga’s customers. One of them converted all his life savings into cryptocurrency and wanted to withdraw his holdings back in October 2018. He received no answer and is not the only Quadriga customer complaining about withdrawal issues.

Meanwhile, Ernst & Young should be issuing a new report soon. Everybody involved is looking forward to any kind of clarification it may bring.