A Vancouver insider’s view of the QuadrigaCX meltdown: ‘It’s kinda devastating’
Software engineer Tong Zou lost his life savings — more than $500,000 — in the QuadrigaCX cryptocurrency meltdown.
The mild-mannered 30-year-old Vancouver resident wasn’t making any clandestine, high-stakes trades when the online platform was shut down on Jan. 28 amid a storm of controversy and conspiracy rumours.
Instead, Zou was simply looking for an easy way to transfer U.S. funds into Canada for a down payment on a local property.
“It’s kinda devastating when you do lose that kind of money,” Zou said, adding that he still believes the future remains bright for cryptocurrency markets.
“But this is a bad mark on the Canadian crypto industry.”
The collapse of Vancouver-based QuadrigaCX has shone a spotlight on a dark corner of an unregulated industry that tends to attract people who are suspicious of traditional banks and prefer the anonymous, decentralized nature of the murky crypto-coin world.
But it has also revealed that some crypto users were burned while conducting the most mundane of tasks.
Zou says he and some of his friends racked up some healthy profits in 2017 when cryptocurrency markets were red hot.
“But we lost it all in 2018 because of the crypto crash,” he says matterof-factly. “I know a few people who got out at the right time, but that wasn’t me.”
As for Vancouver-based QuadrigaCX, Zou admits he chose to move his money through the virtual company in September 2018 because it offered a 10-per-cent premium.
“If there’s any lesson I learned, it’s to not to be too greedy,” he says. “And that’s what caused me to be in this situation. I saw the 10-per-cent premium. I got tempted by it.”
By cryptocurrency standards, QuadrigaCX was a relatively wellknown exchange, mainly because it was one of the first in Canada. Co-founded by Canadian Gerald Cotten in 2013, the exchange appeared to be a safe bet.
By last fall, however, QuadrigaCX users were complaining that it was taking longer than usual to withdraw funds. Zou was aware of the time lag, but that red flag wasn’t big enough.
Then the bottom fell out — though not all at once.
Cotten, the company’s 30-year-old CEO and sole director, was travelling in Jaipur, India, on Dec. 9 when he died from complications caused by Crohn’s disease, a chronic ailment that causes inflammation of the bowels. When his death was publicly announced more than a month later, court documents revealed Cotten was the only QuadrigaCX employee who knew the encrypted pass codes required to gain access to so-called cold wallets holding $190 million in Bitcoins and other cryptocurrencies.
As well, the company confirmed 115,000 users were owed another $70 million in cash, much of which remains tied up in bank drafts held by third-party payment processors.
The Nova Scotia Supreme Court granted QuadrigaCX temporary protection from its creditors on Feb. 5. A court-appointed monitor is searching for the missing money. The company could be sold.
“Yes, it’s unregulated and you’re taking a risk, but … I thought it was reasonably trustworthy at the time,” says Zou. “It turned out to be the worst time to do it.”