QuadrigaCX still can’t find customers’ crypto

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The story continues to get worse for embattled Canadian crypto exchange QuadrigaCX. Coindesk reports that not only do we still not know where their crypto assets have gone, but this is looking much more like a bankruptcy case than a restructuring.

The story up to now has been that QuadrigaCX had $20 million in assets frozen last year, and then their owner, Gerald Cotten, died in December 2018, taking the company’s private keys with him to the grave, and thus millions were lost. As a result, the exchange shut down in late January 2019, and filed for credit protection from the Nova Scotia Supreme Court.

Now, as Ernst & Young (EY) have finished up their audit and investigation into the firm’s assets, the situation is deteriorating even more. EY reported to the court that they still cannot account for $100 million of the firm’s funds, or roughly 26,000 Bitcoin Core (BTC).

They identified six cold storage wallets belonging to the exchange, and presumably they are the same that Cotten held keys to. Until now, it was suspected those wallets could be holding the $100 million worth of crypto, and could be the key to customers getting their money back. EY has determined that only $400,000 remains though.

Where did the BTC go? EY also figured out the wallets were used to send BTC to as many as 14 other crypto exchanges. One exchange has since sent a minimal amount of crypto back to EY. Questions can now be asked if Cotten was using customer funds, meant to be in cold storage, to play the market before his death, losing the bulk of it in the process.

Showing more patience than can be imagined, Nova Scotia Supreme Court Judge Michael Wood has granted QuadrigaCX an additional 45 days to find the money. He also relieved widow Jennifer Robertson from leading the exchange’s search for the lost funds, appointing a chief restructuring officer.

The best hope creditors have now is that an Amazon Web Service account, privately held by Cotten, might have some details as to where the money went. Amazon initially refused to release information due to Cotten having a personal account, but the court ordering the release of the information should mean that EY will have it shortly.

As it doesn’t look like QuadrigaCX will have very much money left to pay its creditors, Judge Wood commented that its hard to call this a restructuring process anymore. He said, “This isn’t so much a restructuring as it is a claims process and liquidation … it does look like an end process.”