(February 5)_Gerald Cotten, founder of large Canadian crypto exchange QuadrigaCX is reported to have died in India back in December. Since then the company has been in deep trouble as Cotten did not leave information on how to access cryptocurrencies held in storage.
The Wallets
A recent article notes: "Any user who wants to transfer bitcoin requires a wallet — located on a server. So-called hot wallets are for live transactions — while so-called cold wallets are for storage to keep coins safe from hackers. Robertson's affidavit says that assets tallied in those wallets show that Quadriga owes clients approximately $250-million as of Dec. 17, 2018. But court documents say the company can only access "hot" wallets at this time."
Jennifer Robertson is Cohen's widow and executor of his estate. Robertson has said she has hired a security expert to aid her recover information about Quadriga Fintech Solutions Corp. and several other companies Cotten registered in BC. She claimed that Cotten's companies had more than 115 thousand clients who had invested more than $70 million. She estimates they are now worth about $250 million in December 2018.
Nova Scotia court issues a stay of proceedings
The Nova Scotia Supreme Court has granted QuadrigaCX an order for credit protection after the reported sudden death of founder Gerald Cohen in India. Cohen was just 30 years old. His death was said to be due to complications of Crohn's disease. The 30-day stay is a bid to stop lawsuits against the company at this point. The hope is that the key to the wallet will be found.
Maurice Chiasson, the company's lawyer, told the court he wanted time to search for about $250 million Canadian in assets that has been inaccessible since his death. The death of Cohen has left about 115,000 users without access to their funds. Court filings indicate that some users have large balances with the largest affected user's balance valued at almost $70 million. Understandably, some users are in panic mode.
QuadrigaCX employees say the only way to access much of the cash was lost when Cotten died. This is rather strange. Usually there is some arrangement such as is described on the appended video in which several people have the keys and at least two of them need to sign on at the same time. This allows for access when someone is not available and also serves as a check against one individual getting access without the other knowing. The appended video argues that Cohen is probably not dead and that there is a scam involved with him transferring coins out of the wallet. Cotten apparently was the only person with the recovery code to access the secure "cold wallets". However, as the video pointed out Cohen had said in an earlier interview that there was a three person arrangement with two being needed to open the wallet.
Access to the cold wallet
Quadriga customer Elvis Cavalic said to CBC: "With a cold storage wallet, it's completely offline. It's not connected to the servers or the infrastructure set up by the exchange. It's usually a physical device that you would plug into a computer and requires a button to be pressed and it might need a password."
Apparently the way to access that wallet was not left with his wife Jennifer. It is passing strange why Cohen would not leave this information with others or that others do not have they keys with several being required to sign in at the same time to the device. He surely should have been aware of the problems should he die or be incapacitated.
Nikhilesh De, a CoinDesk reporter, said that money in the cold wallet could be gone forever if no one can find the key saying: "The idea behind cold storage is that they're inaccessible unless you have the appropriate keys and the access and coins have been lost in the past. There will only be a finite number of bitcoins ever issued, and any bitcoins that are lost are lost forever."
The coins could be lost forever too if Cotten is still alive and is able to withdraw the coins without detection.
Cotten's encrypted laptop will be handed over to lawyers acting for the creditors. Eventually it will be given to a court-appointed monitor. A Nova Scotia RCMP spokesperson confirmed to the CBC that they are assisting an investigation into QuadrigaCX that is being led by the RCMP of Toronto West. Lawyers for the company say that they are considering a possible sale of the company to cover their debts. Given that a considerable amount of their assets cannot be accessed no company might be interesting in buying it.
Previously published in Digital Jouirnal
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