According to the latest updates, the $145 million in cryptocurrencies that QuadrigaCX executives said were stuck in an encrypted cold storage wallet could in actuality be missing. Another report states that the Canadian cryptocurrency exchange is also not regulated (as it claims) by the British Columbia Securities Commission (BCSC).
The Back Story
The firestorm about QuadrigaCX started after its founder Gerald Cotten suddenly passed away when he was in India due to Crohn’s disease. According to his widow, Cotten was the only one in the exchange who had access to the company’s cold wallets, where the majority of the digital assets were stored. She claimed that her husband was so security conscious that he did not share passwords with her or anyone else.
Next, reports emerged that the cryptocurrency exchange was not even regulated as it claimed to be.
QuadrigaCX was established in 2013 in Vancouver, British Columbia. The exchange claimed that it was the first crypto exchange in the country to carry a license from the FINTRAC (Financial Transactions and Reports Analysis Centre of Canada).
However, according to reports, the BCSC did not know about QuadrigaCX until 2017. A BCSC spokesperson told the media that the agency did not regulate the exchange.
Things became even more suspicious after it was revealed that Cotten had filed his last will and testament just 12 days before he died, in which he designated his wife has his only beneficiary as well as the executor of his estates.
Funds in Cold Wallets – Do They Really Exist?
Cryptocurrency analyst James Edwards reportedly reviewed all of the exchange’s publicly available transactions. According to him, there was no evidence of the wallets that QuadrigaCX claimed to have controlled. He stated in a report that there seemed to be no reserves in cold storage wallets as the company claimed.
Edwards also stated that while there was evidence of the existence of cold storage wallets that once had bigger balances, now those balances were minimal. He also said that the hot wallet used for daily transactions had the largest balance.
The co-director at the Initiative for CryptoCurrencies and Contracts, Professor Emin Gün Sirer of Cornell University stated that the key characteristic of Blockchain was that it was completely transparent and so could be audited by anyone.
Sirer said that even if the funds were inaccessible because they were in cold storage wallets, the exchange could still provide the addresses of these cold wallets so that the company’s claims of the funds being locked there could be verified using Blockchain technology.