Although the crypto space is no stranger to misdeeds, transgressions, and scandals, the QuadrigaCX story stands out as something exceptional. The Canadian based cryptocurrency exchange appears to have been playing with fire long before it collapsed and took $134 million with it at the start of this year.
Damning Report From The Administrators
According to the latest report from administrators, Ernest and Young, QuadrigaCX had been operating a fraudulent cryptocurrency exchange. It failed to follow basic business processes, maintain financial accounts, and manage user and company funds appropriately.
In terms of company infrastructure, there was virtually none, with activity largely directed solely by Cotten. Separation of duties and basic internal controls was non-existent, as was segregation of QuadrigaCX funds and Client funds.
There were no accounting records, and Cotten himself decreed that administrator activities would not be logged.
This allowed Cotten to create fake accounts, and credit them with hundreds of millions of dollars of fiat and crypto. He then traded this with real crypto from other users and transferred it off the QuadrigaCX exchange. The majority of this went to accounts in Cotten’s name on other exchanges. Stated the report:
“Significant volumes of Cryptocurrency were transferred off Platform outside Quadriga to competitor exchanges into personal accounts controlled by Mr. Cotten,”
The report states that between 2016 and 2019, Cotten transferred almost 10,000 BTC, 390,000 ETH, and 240,000 LTC out of QuadrigaCX.
Majority of these money was margin traded and all the due diligence, care and attention was upheld. Cotten ran up substantial losses and his margin was liquidated.
The report reveals that an exchange (unnamed) received 21,501 BTC in an account under Cotten’s name. All the crypto assets apart from 8BTC was liquidated for the equivalent of around $80 million over three years. But the whereabouts of these millions remain unknown.
It is also revealed that Cotten and his ‘widow’, Jennifer Robertson, also received significant fiat transfers from Quadriga over the years and obviously, also these funds are unaccounted for.
The ‘couples’ assets including real estate, private aircraft and yachts, luxury cars and precious metals, are subject to a preservation order.
QuadrigaCX collapsed, earlier this year after its CEO was reported to have passed away. Unfortunately, he was the only QuadrigaCX employee that could access company wallets, private keys, and passwords. As a result, over $134 million worth of user funds were lost.
In January QuadrigaCX went to court seeking protection from creditors. The company owed its clients about $190 million both in crypto and fiat. The court appointed Ey as a monitor and after QuadrigaCX filed for bankruptcy, EY was appointed as a trustee and has been hunting for the funds since then.
CoinDesk reports that at the start of June, the Federal Bureau of Investigation (FBI) stepped up its probe into the defunct exchange. It asked victims to come forward and answer a few questions to assist in its ongoing investigation.
- Source: First Appeared Here
- Published Time: 2019-06-20 17:38:05
The views and opinions expressed in the article QuadrigaCX Co-founder and CEO Used Fake Trades to Embezzle User Funds do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research.
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