The biggest bitcoin exchange in Canada, Quadriga CX has found itself in a one of the most helpless of situations after losing CA$190 million following the death of its founder and CEO.
What Went wrong?
QuadrigaCX, in a bid to avoid the ever-increasing hacks into susceptible cryptocurrency exchanges, took a decision that kept the security of its customers at the expense of efficient internal management: something a lot of unsympathetic critics have been quick to point out.
Gerald Cotten, QuadrigaCX’s founder and Chief Executive Officer, passed away in India, holding the secret to the company’s storage wallet. The Canadian exchange has promptly filed an affidavit through Cotten’s widow, Jenifer Robertson, with the Supreme Court of Nova Scotia; with the affidavit also containing the death certificate of Cotten.
The affidavit revealed the total cost locked away is worth almost CA$200 million worth of popular cryptocurrencies such as Bitcoin, Bitcoin Cash, Ethereum and Litecoin. QuadrigaCX like many other large cryptocurrency exchanges have chosen the more secure option of storing customer’s cryptocurrencies in cold storage wallets, to avoid hacking and infiltration. Cold storage wallets are seen as a better option, given they are reinforced security that has no connection to the internet whatsoever and is operated offline.
While other cryptocurrency exchanges have a multi-signature system that ensures unforeseen circumstances like this do not have dire consequences, the integrated system in QuadrigaCX only one person who had access to the cold storage wallets, and that man was Cotton. Jennifer Robertson explained how Cotton was the only one responsible for the keys to the storage wallet. She said via a statement on the filed affidavit:
“The normal procedure was that QuadrigaCX founder and CEO Gerald Cotten would move the majority of the coins to cold storage as a way to protect the coins from hacking or other virtual theft.”
Unsuccessful Salvaging Attempts
Jennifer Robertson, overseeing matters now, has taken a lot of quick decisions to salvage the situation and if possible recover it. Since Cotten’s death earlier in January, she has hired an experienced consultant to attempt decrypting Cotten’s computer to retrieve the keys; all attempts have proved futile. Not only that, but the company is also struggling to solve its consequent liquidity issues and to recover cash stored by third parties. The company announced:
“For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets and . . . unfortunately, these efforts have not been successful.”
Jennifer has admitted that the exchange has received many offers attempting to buy the exchange, and if the wallets are not recovered, they might consider selling to reimburse their customers.