Crypto exchange cannot repay $190 million to their clients after their founder died

Technology

Canadian crypto exchange QuadrigaCX claim that they cannot repay most of $190 million in client holdings after the only person who knew the passwords to their “cold storage,” unexpectedly died in India in December 2018. It was reported by Coindesk on Friday.

In a sworn affidavit with the Nova Scotia Supreme Court, widow Jennifer Robertson said that QuadrigaCX owes its customers some $190 million in both cryptocurrency and fiat money. QuadrigaCX has filed for creditor protection because it says it cannot access the funds stored in “cold storage,” just the comparatively smaller amount in a “hot wallet” used for transfers.

A 2017 Wall Street Journal article noted that unlike stock exchanges, which only facilitate transactions, crypto exchanges are uniquely vulnerable because they store cryptocurrencies for their customers. However, typically the threats associated with this practice are hackers and other cybercriminals, rather than lost passwords.

Cotten held “sole responsibility for handling the funds and coins” and no other members of the team could access the stored funds. QuadrigaCX announced Cotten’s death in mid-January, saying he had died “due to complications with Crohn’s disease on December 9, 2018 while travelling in India, where he was opening an orphanage to provide a home and safe refuge for children in need.”

While Robertson has Cotten’s laptop in her possession, CoinDesk wrote, she says she does not know the password, and a technical expert recruited by the firm has been unable to bypass its encryption. She also says Cotten left behind no business records.

Some other reporting has suggested it is possible some of the funds in question moved after the case was publicized, and though the evidence was not definitive, it and the strange circumstances of Cotten’s death spurred accusations that his demise was either faked or the pretext for an exit scam by other parties with access to the holdings.

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