The founder of a Canadian cryptocurrency exchange suddenly died overseas, leaving roughly $190 million CAD in digital tokens owed to customers inaccessible, according to court documents filed by the founder's widow last week.
QuadrigaCX is a popular cryptocurrency exchange where Canadian customers can deposit funds in order to trade tokens like Bitcoin on the platform. QuadrigaCX has a financially troubled history—last year Canadian bank CIBC froze bank accounts related to the exchange because the bank was unable to determine who owned the funds. Customers have complained about being unable to withdraw money from the exchange in the past.
Last week, QuadrigaCX filed for creditor protection in the Nova Scotia Supreme Court. In a sworn affidavit, published by Coindesk, Jennifer Robertson—widow to the exchange’s founder—revealed that the company owes more than 90,000 customers roughly $260 million CAD total ($70 million in fiat, and roughly $190 million in cryptocurrency as of today’s prices).
Most of those funds are apparently inaccessible after the founder, 30-year-old Gerald Cotten, died in India last year due to complications from Crohn’s Disease, according to the affidavit.
According to the affidavit, Cotten “took sole responsibility” for handling the exchange’s coins. Cryptocurrency funds are managed with the use of private “keys”—if the keys are lost, or the owner disappears without letting colleagues know how to access the keys, then the cryptocurrency is effectively lost. According to the affidavit, the majority of the exchange’s funds were kept in “cold” storage, likely meaning that the keys were stored on a secure device not connected to the internet for security purposes. It’s kind of like a bank vault, as opposed to what a teller has on hand.
According to Robertson’s affidavit, Cotten was “always very conscious about security,” and so far attempts to access the funds kept in cold storage have been unsuccessful. According to the affidavit, Cotten kept an encrypted USB drive and an encrypted laptop, neither of which can be accessed currently. “Quadriga’s inventory of cryptocurrency has become unavailable and some of it may be lost,” the affidavit states.
Cotten signed a will on November 27, the Globe and Mail reported, days before his death on December 9, 2018. The will made Robertson the executor of his estate, and contained provisions such as $100,000 for the care of two pet chihuahuas—but apparently no instructions for retrieving his customer’s funds in the event of his death.
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Robertson hired an investigator, Christopher McBryan, to attempt to access the secure devices and recover tokens or business records, according to the affidavit.
When reached for comment, McBryan invoked solicitor-client privilege and referred Motherboard to the law firm he is employed by, Waddell Phillips. Spokespeople for Waddell Phillips were not available to comment.
The idea that a sole executive controlled the majority of customer funds, and made no contingency plans to disburse those funds in the event of their death—especially after signing a will—has raised the specter of elaborate fraud in the cryptocurrency community.
Jesse Powell, CEO of US-based cryptocurrency exchange Kraken, told Motherboard in an email that Kraken is using publicly-available blockchain records to try and track the lost funds.
“Just given the sophistication of the people involved and the amount of time they had to make plans, it does not seem believable that they would have allowed this to happen, unless they wanted it to happen,” Powell told Motherboard in an email.
Kraken is “proactively” reaching out to Canadian law enforcement including the RCMP, Powell said.
“We have serious doubts about the official story offered and would like to share our thoughts and findings,” Powell wrote. “Only law enforcement will be able to acquire the private but relevant non-public information to stitch together all the pieces.”
The RCMP did not respond to Motherboard’s request for comment by publishing time.
Adding to Quadriga’s cryptocurrency woes is its inability to refund customers fiat currency. Canadian bank CIBC froze bank accounts belonging to one of Quadriga’s payment processors, Costodian, last year, which resulted in a court battle. Eventually, CIBC released the funds to the courts, which in turn released them to Costodian in the form of bank drafts. According to Robertson’s affidavit, Costodian has not been able to find a banking partner to accept the bank drafts, and the exchange itself has not been able to open a bank account.
Quadriga will ask the courts on Tuesday to assign accounting firm Ernst & Young as a financial monitor. When reached for comment, Ernst & Young spokespeople declined to comment.
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This article originally appeared on VICE US.