Category Archives: EY

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EY: QuadrigaX Owner Traded on Fake Accounts with User Deposits

EY_ QuadrigaX Owner Traded on Fake Accounts with User Deposits

Big Four audit firm Ernst & Young (EY) have found what seems to be solid evidence that the late owner of defunct crypto exchange QuadrigaX had been transferring user funds off the platform and using them to trade with fake accounts on other platforms.

The fifth report from EY, who was appointed court monitor in ongoing litigation, was filed with the Supreme Court of Nova Scotia yesterday. In it, EY has provided damning evidence that the exchange was “significantly flawed from a financial reporting and operational control perspective”.

Gerald Cotten, the deceased owner, is thought to have been the single individual in charge of most of the activites. There was also a shocking lack of segregation between job tasks and basic internal controls. Assets were also not kept separately from Quadriga itself or its users.

EY says that because of this, the exchange could not possibly know if it was profitable, since user funds were mixed together with the exchange’s wallets. In addition:

“Significant volumes of Cryptocurrency were transferred off Platform outside Quadriga to competitor exchanges into personal accounts controlled by Mr Cotten. It appears that User Cryptocurrency was traded on these exchanges and in some circumstances used as security for a margin trading account established by Mr Cotten.”

Falsified accounts were also detected on Quadriga under aliases, supporting the theory that unbacked deposits were used to trade on the platform, leading to inflated revenues, artificial trade volumes and user numbers, and the withdrawal of user deposits. The fees and commission, as well as trading losses on external platforms further impacted QuadrigaX’s crypto reserves.

Finally, EY could not confirm the identity of wallet holders where huge sums of Quadriga crypto was transferred to. Quadriga owes some 76,000 users an aggregated value of funds worth CAD 214.6 million (USD 162.2 million).

 

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EY: Many ETH Dapps Aren’t the Most Productive

EY: Many ETH Dapps not the Most Productive

Big Four accountancy firm Ernst & Young (EY) has presented research that says that as much as 83% of decentralized applications (Dapps) on the Ethereum network are “not in the most productive uses“.

EY Global Innovation Leader for blockchain Paul Brody had revealed this piece of news during a Fintech Forum hosted by the US Securities and Exchange Commission (SEC) yesterday while talking about blockchain developments and the digital asset industry.

In the opening ‘Capital Formations Considerations’ panel, Brody pointed out that while blockchain tech implementation had seen explosive growth, those that hoped to become disruptors had neglected the early principles of how the tech should be applied to seek solutions to real-world problems rather than mere “money chasing”.

He reminded that capital markets only served to take investments and put it to productive work, which is something the crypto space had not done very well, with most Dapps on Ethereum “maybe not in the most productive uses”.

Citing blockchain analytics company DApp.com’s data from a Q1 2019 report, he said that only 14% of such Dapps were used at crypto exchanges, and the most in gambling (44%) and gaming (13%).

Brody insisted that Dapps should focus on areas such as distributed computing, fractional real estate, new business models, and fractional infrastructure if they truly wanted to create a “tremendous lasting legacy that is positive”.

The forum, organized by the SEC’s Strategic Hub for Innovation and Financial Technology was meant to facilitate the commission’s engagement in the space, and had purposely included blockchain and distributed ledger technology (DLT). Early in May, Bitcoin News had written about the forum, highlighting the fact that many observers had thought this forum to merely be a vanity effort, with some calling it an event “just for show“.

 

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QuadrigaCX Assets, Debts Revealed by EY Report

QuadrigaCX Assets, Debts Revealed by EY Report

Big Four accountancy firm Ernst & Young (EY) has released a new audit report that spells out the exact assets as well as debts of the now defunct Canadian crypto exchange QuadrigaCX and its subsidiaries.

The audit company was monitoring the creditor proceedings of QuadrigaCX, and this preliminary trustee publication reveals only USD 20.8 million in assets in comparison to about USD 160 million in liabilities as of 12 April 2019. In the same week before that date, Quadriga filed for bankruptcy and was approved by the Nova Scotia Supreme Court Justice Michael Wood. As expected, the bankruptcy paved the way for a “potential sale of assets, including but not limited to Quadriga’s operating platform.”

Specifically, debt and assets are spread between three subsidiary companies; 0984750 B.C. LTD. (the “Quadriga Estate”), Quadriga Fintech Solutions and Whiteside Capital Corporation.

The saga began last year when its co-founder Gerald Cotten, passed away in India. The exchange then claimed that he was the sole owner of all the private keys to its cold wallets, containing all the digital assets of their clients.

However, in March, EY identified at least six wallets primarily used to store Bitcoin. Apart from one inadvertent transaction of half a million US dollars, not one of then received any deposits since April 2018.

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Mastercard, Coinbase, Among 40 Firms in $42 Million Lobbying Deals in Q1 2019

Mastercard, Coinbase, Among 40 Firms in  Million Lobbying Deals in Q1 2019

Political news portal Roll Call reported this week that some 40 corporate entities had spend a total of USD 42 million in the first quarter of 2019 to lobby for blockchain and crypto related causes. It based its report on data from the Federal Election Commission.

While crypto industry names such as Coinbase may not raise any eyebrows, traditional finance names such as Mastercard have also joined Big Four accountancy firms Ernst & Young and Accenture in the lobbying chase when it comes to crypto.

The biggest spender of all was the US Chamber of Commerce, who accounted for USD 16.4 million for fintech lobbying in general. Mastercard itself set aside USD 720,000 for lobbying issues related to virtual currencies. Coinbase spent a distant USD 50,000 on the Banking Secrecy Act.

Blockcain Association director of external affairs Kristin Smith said that recognized lobby groups were already targeting existing state bills, like the Ohio Bill, to exempt crypto from securities regulations under the US Securities and Exchange Commission (SEC):

That’s probably been our biggest focus and it will continue to be our biggest focus for the next couple of months.”

In the previous quarter, only 33 entities had been lobbying for blockchain, so this period has seen a 20% growth in terms of the number of firms.

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EY Reveals Free Corporate Software for Ethereum Onboarding

Nightfall

One of the Big Four accounting firms, Ernst & Young (EY), is now launching a new free software aimed at helping its corporate clients use the Ethereum network and blockchain in an encouraging sign of corporate support for blockchain tech adoption.

A Coindesk article broke the announcement yesterday, reporting that EY’s Nightfall protocol was developed over the course of 2018 by a team of over 200 blockchain developers. Scheduled for a launch in May, the protocol was built with use cases including supply chains, food traceability and transactions between company branches and public finance.

Nightfall will also utilize a technology commonly employed by other enterprise blockchain platforms called zero-knowledge proofs, which allow for private transactions on a shared ledger. It will not be a private blockchain, however, as EY’s protocol is built to run on the Ethereum network.

EY is also displaying an unexpected approach to intellectual property, insisting that it will make the code publicly available on the public domain and open source. It will also be license-free.

EY global innovation leader for blockchain Paul Brody said:

“We want to maximize adoption and community involvement, we want people to adopt it, and adapt it, and improve it. If we retain ownership, people may not invest that much time and energy in something they might not control. The cleanest way to make everybody use it is just to give it away with no strings attached.”

Brody also said that Nightfall would run in the Microsoft Azure cloud environment and are integrated with SAP enterprise software from SAP, something most clients would be familiar and comfortable with.

 

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