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Crypto Exchange QuadrigaCX Funds Trapped in Cold Wallet as Only Dead CEO Had Access

Crypto Exchange QuadrigaCX Funds Trapped in Cold Wallet As Only Dead CEO Had Access

Another colossal misfortune greets 115,000 crypto traders who had their funds trapped in the now insolvent crypto exchange QuadrigaCX as it has reported that it is unable to access about USD 190 million of funds stored in the cold storage as well as fiat drafts held in custody, according to a filing for bankruptcy with the Nova Scotia Supreme Court on 31 January.

QuadrigaCX’s misfortune began when the founder and CEO Gerald Cotten reportedly died from Crohn’s disease in early December 2018, but the exchange waited until early January to announce his passing.

It was common practice for Cotten to move funds from the hot wallet into the cold storage for security purposes, and it was his sole responsibility. However noble the act – protecting users from hackers, – his passing has left the crypto exchange in a predicament, as only he has access to the cold wallet storages.

According to the affidavit submitted by Robertson, the storages hold 26,488.59834 Bitcoins; 11,378.79082 Bitcoin Cash, 11,149.74262 Bitcoin Cash SV, 35,230.42779 Bitcoin Gold; 199,888.408 Litecoins; and 429,922.0131 Ethereum as at 18 January and further reports indicated that the exchange was still accepting deposits after Cotten’s death.

The exchange also had challenges with fiat custody as funds that were deposited in a personal account were frozen – the company had no corporate account due to the nature of cryptocurrency business in the region, and funds operated through third-party has also been held back awaiting further order from the court, according to the affidavit.

A total of about USD 32.5 million in fiat is stuck and awaiting court proceedings before any action can be advised. Perhaps there’s hope for creditors funds to be paid back, which is however largely dependent on how the court proceedings turn out. According to the affidavit:

“The residual balance of these funds [once the cost of the proceeding is deducted], combined with net recoveries from other sources, would be made available to satisfy the claims of Quadriga’s creditors as confirmed through the CCAA process.”

The exchange hopes for a preliminary hearing on 5 February to appoint a third-party Ernst & Young Inc., to monitor the proceedings.

While exchanges provide a rather unique opportunity for digital asset owners to interact and have played important roles in the development of the cryptocurrency industry; seeing that most of the promised platforms are yet to launch a viable product, safety remains an issue.

Exchanges continue to battle on the frontline with compliance, market share, liquidity and security threats and perhaps will continue to do so until there are more standard protocols applicable for the industry. Quadriga’s unfortunate situation is bound to trigger some ill feelings towards crypto, and dent what little reputation has been built thus far. Fear that it might follow suit with the biggest cryptocurrency exchange fallout in the history of crypto – the Mt. Gox – is a possibility.

This incident has, however, further demonstrated the need for users of crypto exchange to have more active roles in the control of their funds, whether stored on an exchange or in a cold wallet in case of emergencies and unpredictable natural disaster as with the case of QuadrigaCX. As for exchanges, employing contingent approach such as multi-signature security systems can go a long way to prevent disasters such as this from scaling.

 

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Better Late than Never in $1 Million Payoff for KODAKOne’s Blockchain Entry

KODAKOne Better Late than Never Blockchain Entry Paid Off  million

Image rights management platform KODAKOne has revealed to Breaker Mag that the beta testing of its image rights Post Licensing Portal has generated over USD 1 million in licensing claims within a short period of the test.

The Kodak company filed for bankruptcy in 2012 when it struggled to keep up with the shifting technology landscape toward digital images. However, it found its way into the blockchain industry with the intent of creating a digital rights management platform for photographers.

About a year ago, Kodak CEO Jeff Clarke was quoted by news outlet Fortune as saying: “For many in the tech industry, ‘blockchain’ and ‘cryptocurrency’ are hot buzzwords, but for photographers who’ve long struggled to assert control over their work and how it’s used, these buzzwords are the keys to solving what felt like an unsolvable problem.”

Back then, when the old business giant announced its entry into the blockchain industry, it rattled a lot of spectators as stocks soared by as much as 70% on the same day. This followed with criticisms describing the move and its partnership with RYDE (then WENN Digital) as cashing in on the blockchain and ICO hype. Some even called it a “last desperate bid for relevance”.

While it was true that Kodak hopped on the crypto-frenzy bandwagon in early 2018, the same can be said about them being partakers of the 2018 market downturn. However, a year later and KODAKOne looks like one among a few who stand true to their intent of making something tangible out of the blockchain.

Today, the story is different as they have both proofs of concept and value for their initiative. The platform is currently built on a hybrid infrastructure that leverages the Ethereum, Stella, and Hyperledger technologies. Still, small victories aren’t always conclusive in crypto world, as it’s only been a year, however, they may have made their way to some investors watchlist for the long term with this success story.

More importantly, perhaps it is too soon to call driving blockchain initiative a lost cause for startups and traditional businesses seeking rejuvenation.

KODAKOne co-founder Cam Chell also told Breaker Mag that in the future, the project “hopes to meld AI, cryptocurrency payments, and on-chain metadata to open up a potentially major new source of income for professional photographers, and maybe even amateurs”.

It is indeed safe to say that the bearish trend of the cryptocurrency market isn’t the entire story for 2018. There are startups digging their heels into refining their core processes, some have had to reevaluate their organizational structures in other to accommodate for the top performers. This goes on to prove that the value of the blockchain industry transcends speculation.

 

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Mt. Gox Collecting Creditors’ Lost Funds Claims

Japanese cryptocurrency exchange Mt. Gox began collecting civil rehabilitation claims on Thursday as it attempts to start restoring the creditors’ lost bitcoins.

The platform released an online claim submission process with Nobuaki Kobayashi as the acting trustee. The claimants will be able to respond until October 22. Detailed online is advice and a step-by-step guide on how exactly users can make their claims or access their Mt. Gox accounts to claim the ”return of cryptocurrency and money against MTGOX.” There is also an offline process that can be followed, should there be any issues or lack of information required to submit claims online.

In an online statement earlier this month, Mt. Gox officials warned that any proof of claim not issued by the deadline would be subject to disenfranchisement — a loss of the right to claim. It also detailed the Mt. Gox administration’s ambition to make the whole civil rehabilitation process as comprehensive and transparent as possible. The statement reads: ”The rehabilitation plan should be simple and the implementation thereof should have a high degree of certainty.”

These recent proceedings have been welcomed by users of the platform that failed to submit claims prior to its bankruptcy.

Mt. Gox’s controversial history

One of the earliest cryptocurrency exchanges, Mt. Gox, collapsed in early 2014 following the biggest Bitcoin theft to date: BTC 850,000, approximately USD 473 million at the time.

While BTC 200,000 were later recovered, they remained frozen in Mt Gox’s accounts as it fell into bankruptcy, leaving creditors waiting nearly four years to know whether or not to ever expect their funds returned.

Mass bitcoin sell-offs by Mt. Gox has characterized the exchange’s practices since November 2017, often allegedly causing markets to become unsettled. In June, however, Kobayashi stated that he would make sure this came to an end.

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