QuadrigaCX: Bitcoin exchange said to have cheated massively

The Bitcoin exchange QuadrigaCX is said to have systematically ripped off its customers. According to court documents, platform operator Gerry Cotten has withdrawn a lot of money for his own purposes. It remains unclear where a large part of the money is spent.

As you already all know, there are many ways to lose money with Crypto Currencies, as you can read at quantumbooks.com. The guesswork over the insolvent Bitcoin exchange QuadrigaCX and the customer assets that have disappeared from it is nearing its end. Gerry Cotten, the founder of the Canadian trading platform, who died in early 2019, is said to have stolen a significant portion of the money for his own purposes. To do this, he resorted to fake customer accounts. The explosive information comes from a court report dated 19 June. Many traditional invester trusted the exchange, a lot of high risk traders also switched from gold to BTC.

QuadrigaCX had already declared itself insolvent in February of this year. The insolvency report was preceded by the death of Cotten. According to information available at the time, Cotten was the only person to have had the passwords for the cold wallet of the Bitcoin exchange. However, he took this secret and thus also the only access to the assets of QuadrigaCX with him into his grave. It didn’t take long for doubts to arise about such a presentation of events. The existence of the Cold Wallet was increasingly questioned. Does QuadrigaCX operate a huge snowball system? Had Cotten even faked his death? The report now provides a preliminary answer to some of these questions. Whether Gerry Cotten will return from the dead for the time being remains to be seen.

QuadrigaCX had serious organisational shortcomings

According to the report, Cotten had an enormous degree of control over the activities of the Bitcoin exchange. More strikingly, the investigation found no separation between client assets and exchange reserves. The way in which the company was managed “showed significant shortcomings from the point of view of financial reporting and operational controlling”. However, these deficiencies did not exist without reason. Finally, Cotten is said to have transferred client funds from the QaudrigaCX account to his own. With these funds, which were kept at other crypto exchanges, Cotten then tries to act as a trader. Apparently with little success. The report attests negative consequences for his own company: “Trading losses and additional fees charged by the stock exchanges seem to have negatively influenced Quadriga’s cryptographic currency reserves”. The full extent of the fraud, however, only becomes clear when you look at Cotten’s method of raising the money.

Cotten used fake QuadrigaCX user profiles

As mentioned above, Cotten used fake customer profiles. These were counterfeit insofar as the fiat money and crypto currencies booked on them did not exist at any time. “Chris Markay”, the most widely used account, therefore had over 220 million Canadian dollars paired with an impressive portfolio of different crypto currencies. Cotten then exchanged the non-existent funds for actual crypto currencies, which he then debited from the platform. The trading volume of QuadrigaCX was also artificially inflated in this way.

Altogether Cotten captured the gigantic sum of 9,450 BTC, 387.738 ETH as well as 239.020 LTC. Investigators located only a fraction of these crypto assets. Bad news for the bounced QuadrigaCX customers. Their outstanding claims currently amount to 214.6 million Canadian dollars. Only 15 percent of them have been secured so far. Finally, the FBI also intervened in the investigations.