QuadrigaCX crypto exchange update: The money is missing

  • The story of Canadian cryptocurrency exchange QuadrigaCX took an interesting twist this week when auditors reported that the exchange's lost wallets were actually empty.

    Last month we wrote about the unfortunate story of Canadian cryptocurrency exchange QuadrigaCX that lost access to over $140m US in funds when its founder Gerald Cotten passed away. The exchange accepted deposits from users into their accounts in cryptocurrencies such as Ethereum and facilitated trades between users, but when Cotten died he took 115,000 cryptocurrency wallets with him.

    As with many financial exchange systems, only a small amount of actual working capital was required to handle withdrawals. In order to keep the rest of its deposits secure and mitigate the risk of theft, QuadrigaCX moved most of its reserves into a set of "cold wallets" which were contained in an encrypted offline computer system. It's this computer system that the exchange lost access to when Cotten died.

    The exchange ceased trading last month and filed for a financial protection order to give it time to figure out its liabilities and debt obligations, and since then has tried to track down where all the exchange's capital is stored. The beauty of blockchain-based currencies is that there's a permanent record of every transaction ever made between wallets, so funds are highly traceable by forensic auditors.

    Now the story has taken an unexpected twist: The money isn't where it's supposed to be. Auditors Ernst & Young have traced transactions in and out of the cold wallets that the firm lost access to when Cotten died, and found that they were all empty as of about eight months before his death. It's now looking as if there may have been fraud or theft involved before the exchange closed, and a $100,000 bounty has been placed on any information that could lead to the recovery of the funds.

    Source: Wired UK

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    Brendan is a Sync NI writer with a special interest in the gaming sector, programming, emerging technology, and physics. To connect with Brendan, feel free to send him an email or follow him on Twitter.

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