Category Archives: Gerald Cotten

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QuadrigaCX

Widow Of QuadrigaCX Founder Attempts $9 Million Settlement

QuadrigaCX

The widow of QuadrigaCX founder Gerald Cotten, Jennifer Robertson, inherited about USD 9 million of assets when Cotten died. Now Robertson is turning over these assets to the trustee overseeing the QuadrigaCX case, aside for USD 162,000 of her personal assets.

QuadrigaCX used to be one of the biggest cryptocurrency exchanges in Canada, until its founder passed away in India. Allegedly, Cotten was the only one who had access to USD 190 million of cryptocurrency private keys, meaning everyone who used QuadrigaCX lost all of their funds.

Analysis and reports indicate that Cotten actually lost the money when trading, and perhaps embezzled the money in other ways, although nothing is confirmed at this point.

Robertson claims that she had no idea that the USD 9 million she inherited was from ill-gotten gains. She says she believed the money was from profits that Cotten legitimately earned.

The USD 9 million that Robertson is handing over is less than 5% of the money lost on QuadrigaCX, and it is up to the judge as to whether this settlement offer will be acceptable, or if litigation against Robertson will continue.

 

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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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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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QuadrigaCX Enters Bankruptcy Proceedings

QuadrigaCX Enters Bankruptcy Proceedings

Canadian Cryptocurrency firm QuadrigaCX filed its bankruptcy application in a Nova Scotia Court this week in a bid to bring the three-month saga to its next stage after claiming that the death of its CEO left a US 260 million debt.

This means that the court order giving the legal group Ernst and Young will come into action in an attempt to recoup the funds owed to 115,000 users who have been left with no access to their money, although this won’t be an easy process as the company was discovered to have no real assets.

After the death of 30-year-old CEO Gerald Cotten in India, it was revealed he was the only person who knew the encrypted passcodes needed to access USD 190 million in cryptocurrency locked in offline digital wallets.

The situation has been further confused as it is now known that the deceased mixed his personal and corporate finances and company funds had been used to buy assets which had no connection with Quadriga. The current court order prohibits Cotten’s widow Jennifer Robertson in accessing any Quadriga assets but she is allowed access to living expenses through two private bank accounts overseen by the court.

It is thought that a sum of about USD 70 million in cash is still owed to Quadriga clients although the funds are mostly in third-party accounts and payment processor banking. This adds to the complexity of finding a solution for the company’s former clients who continue to spread rumors on social media in the absence of any concrete information as to the whereabouts of their funds.

 

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Access to Late QuadrigaCX CEO’s Laptop May Help Recover Lost Funds

Access to Late QuadrigaCX CEO's Laptop May Help Recover Lost Funds

On Tuesday, interested parties were present at the Nova Scotia Supreme Court for the hearing of the plea for creditor protection by the insolvent Vancouver-based cryptocurrency exchange QuadrigaCX. The exchange’s CEO died late last year with access to what was thought to be the only means to recover over USD 190 million of cryptocurrency belonging to over 115,000 of its users and possibly some of its reserve funds as well.

 

Bitcoin News reported on how the CEO Cotten died suddenly in India of Crohn’s disease and was allegedly the only one who had access to funds stored in the cold wallets on behalf of users of the crypto exchange.

 

As attested by Cotten’s widow earlier in an affidavit, the exchange had no physical office, and Cotten was the sole operator in terms of moving funds between the exchange and the cold wallet, which he did from his laptop – implying that his laptop was the workstation and possibly where the cold wallet details were most likely stored.

 

QuadrigaCX reported that it was unable to access the cold wallet as well as fiat funds that were stored with custody due to certain legal matters. However, a ray of hope seems to have appeared when experts opined that with the right tools, the lost funds may be recovered from Cotten’s laptop, given that it contained the private keys.

 

However, what little glimpse of hope was quickly extinguished when it was later established that the private keys to the cold wallet weren’t on Cotten’s laptop. Moreover, according to Manie Eagar, CEO of Vancouver-based DigitalFuture, if the private keys aren’t in the laptop, recovering the funds will be practically impossible as the wallet’s encryption is beyond what a regular cracking attempt could achieve with existing computers.

 

Things had been looking pretty bad for QuadrigaCX for a while now, even before the mishap. In October last year, the exchange came under siege by the Canadian Imperial Bank of Commerce (CIBC), which seized USD 28 million from the exchange.

 

While the situation has been dire for those involved, a petition has been made to appeal to cryptocurrency exchange Kraken to take over the exchange and its operation and help salvage the situation. At this point it remains unknown what specific action is to be taken in terms compensation to the users, however, Kraken has offered to help with the investigation.

We have thousands of wallet addresses known to belong to @QuadrigaCoinEx and are investigating the bizarre and, frankly, unbelievable story of the founder’s death and lost keys. I’m not normally calling for subpoenas but if @rcmpgrcpolice are looking in to this, contact @krakenfx

— Jesse Powell (@jespow) February 3, 2019

 

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