Crypto boss dies holding only password to unlock $145m in customer coins

Pedro Gonçalves
Crypto boss dies holding only password to unlock $145m in customer coins

Canada's leading cryptocurrency exchange company has said it cannot repay $145m to clients because its founder died unexpectedly with the passwords, effectively locking the company from acessing the digital assets.

Following the sudden death of its founder Gerry Cotten, cryptocurrency exchange QuadrigaCX is reportedly unable to access CA$190ms ($145m) in digital assets such as  Bitcoin, Litecoin, Ether and other digital tokens held for its customers, Canadian news daily The Globe and Mail reports. 

Gerald Cotten — known as "Gerry" to friends — was the founder of Quadriga CX, which launched in 2013. But the 30-year-old died due to complications from Crohn's disease in December 2018 during a visit to India. 

After Gerry's death, Quadriga's inventory of cryptocurrency has become unavailable and some of it may be lost"

Cotten, who was notoriously concerned with security, was the only person in his company with access to the password needed to transfer most of his clients' money. The exchange kept most its assets in offline storage systems called cold wallets, which are secured by digital security keys in order to protect them from hacking and theft. 

According to his widow Jennifer Robertson, he had "sole responsibility for handling the funds and coins". She confirmed about $145m in both cryptocurrency and normal money is in "cold storage" - where the company, or just Cotten in this case, holds the key, not the client.

Robertson has access to Cotten's laptop but writes that she is unable to open it. "The laptop computer from which Gerry carried out the companies' business is encrypted and I do not know the password or recovery key. Despite repeated and diligent searches, I have not been able to find them written down anywhere."

Some experts told The Globe and Mail that it was unusual for a single executive to control access to an exchange's funds, as it would have made Cotten a target for kidnapping and extortion. "It's the equivalent of walking around with millions of dollars in cash on you at all times," Michael Gokturk, CEO Einstein Exchange in Vancouver, said.

Robertson has retained an expert to try to access the funds but he has so far not been able to do so. She added in the affidavit that she and her colleagues have had threats made against them from online cryptocurrency communities - especially from Reddit users, that doubt Cotten is really dead.

The platform continued to accept funds after Cotten's death but was paused by directors on 26 January.

"After Gerry's death, Quadriga's inventory of cryptocurrency has become unavailable and some of it may be lost," Robertson said, adding that the company's access to currency has been "severely compromised" and the firm has been unable to negotiate bank drafts provided by different payment processors.

Quadriga CX's directors posted a notice on the firm's website on Jan. 31 that it was asking the Nova Scotia court for creditor protection while they address "significant financial issues" affecting their ability to serve customers. A hearing is scheduled for  this week, and Ernst & Young has been chosen as a proposed monitor.

According to CoinDesk, more than 115,000 customers have been left out of pocket.

 QuadrigaCX is not regulated by the British Columbia Securities Commission (BCSC), the province's financial regulator. 

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