QuadrigaCX cryptocurrency disappears More than $460,000 in assets escape into ‘cold wallet’
HALIFAX — The court-appointed monitor overseeing the search for the $260 million owed to clients of the faltering QuadrigaCX cryptocurrency exchange says it recently found more than $900,000 in digital assets — only to see more than half of those crypto-coins escape its grasp.
The bizarre turn of events was revealed Tuesday in the first court report submitted by Ernst and Young, which was appointed monitor Feb. 5 when the Nova Scotia Supreme Court granted the insolvent company protection from its creditors.
The report says the monitor learned last week that QuadrigaCX was holding $902,743 in Bitcoin, Litecoin and Ether cryptocurrencies in so-called hot wallets — but something went wrong on Feb. 6.
Ernst and Young says QuadrigaCX “inadvertently” transferred 103 Bitcoins valued at $468,675 to so-called cold wallets, which the company is now unable to access.
“The monitor is working with management to retrieve this cryptocurrency from the various cold wallets, if possible,” the report says. “The monitor has made arrangements to transfer the remaining cryptocurrency into a cold wallet which will be retained by the monitor.”
About 115,000 QuadrigaCX customers are owed about $70 million in cash and $190 million in Bitcoin and other cryptocurrencies.
The Vancouver-based exchange was shut down Jan. 28, more than a month after its CEO and sole director — Nova Scotia resident Gerald Cotten — died while travelling in India, leaving his company without access to much of its cryptocurrency.
His widow, Jennifer Robertson, has said in court documents that Cotten was the only person with access to his laptop, which is thought to contain the digital keys to the cold wallets.
Cold wallets are offline storage devices protected by encryption technology. Cryptocurrency exchanges typically use them to store the bulk of their digital assets, which puts them beyond the reach of online hackers. Hot wallets are online sites that store smaller amounts of cryptocurrencies, making them readily available for trading — a practice akin to using a currency float in a cash register.