Quadriga's crypto ended up in CEO's accounts

Pedro Gonçalves
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Quadriga's crypto ended up in CEO's accounts

Gerald Cotten, the late Quadriga CEO, created a string of accounts on his Canadian cryptocurrency exchange, each under an alias and containing bogus dollar balances, according to Ernst & Young auditors.

He used those accounts to buy his customers' cryptocurrency with those digitally conjured dollars that didn't actually exist, and then moved the ill-gotten Bitcoin and Ethereum to his accounts at other cryptocurrency trading sites.

Gerald Cotten, the 30-year-old founder of QuadrigaCX, died in India on Dec. 9, 2018, due to complications from Crohn's disease, according to a sworn affidavit by his wife. At the time of his death, Cotten was the only person with the passwords to access the customers' funds. 

Substantial funds were transferred to Mr. Cotten personally and other related parties"

The latest report from Ernst & Young, which is overseeing the bankruptcy process for Quadriga Fintech Solutions Corp., paints a clearer picture of a Vancouver-based firm that lacked financial reporting and operational controls, run primarily by a founder whose actions ultimately led to its collapse, leaving hundreds of customers owed millions in cash and cryptocurrency.

"Mr. Cotten created identified accounts under aliases where it appears that unsupported deposits were deposited and used to trade within the platform resulting in inflated revenue figures, artificial trades with users and ultimately the withdrawal of cryptocurrency deposited by users," says the report. "Substantial funds were transferred to Mr. Cotten personally and other related parties."

The report notes that substantial amounts of cryptocurrency were transferred to "wallet holders" whose identity they were unable to confirm. Ernst & Young was also unable to find any evidence that Quadriga maintained any traditional books or accounting records since at least 2016.

Quadriga had some 360,000 account holders, and about 76,000 are owed funds amounting to about CA$215m ($163m).

The bizarre situation has fueled conspiracy theories about whether Cotten is actually dead. However, a copy of his death certificate was attached to the affidavit submitted by his wife, which was obtained earlier this year by CoinDesk.

 

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