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QuadrigaCX is the gift that keeps on giving. The now-defunct Canadian cryptocurrency exchange has been at the center of a six-month-long controversy involving 650,000 ETH, a “Big-Four” auditor, a private jet, and the mysterious death of the man behind it all.

Ernst and Young, the audit giant, the court-appointed third-party monitor and now the bankruptcy trustee of the QuadrigaCX proceedings, released its fifth report to the Nova Scotia Superior Court of Justice with some startling claims about the tidings of the now-deceased CEO, Gerald Cotten.


The report suggested, right off the bat, that the exchange was muddled in internal administrative strife, due to a lack of proper accounting. The onus for this strife was on one single individual, Cotten, and “internal controls” were negligible. The report said,

“Quadriga’s operating infrastructure appears to have been significantly flawed from a financial reporting and operational control perspective. Activities were largely directed by a single individual, Mr. Cotten and as a result, typical segregation of duties and basic internal controls did not appear to exist”

A line of demarcation between the funds of the exchange and users was also absent, which the report summarized as a lack of “segregation.” The funds belonging to users, held by the exchange, were used “for a number of purposes other than to fund user withdrawals.”

Despite being a cryptocurrency exchange, presumably in an effort to hide their tracks, QuadrigaCX engaged in several ‘cash’ transactions. However, the same could not be verified by the monitor. Even the most basic of corporate records, especially the ones pertaining to the exchange’s fiat and crypto inventories, could not be traced and in this too, Cotten was at the head of it all.

“In addition, the Monitor understands passwords were held – 7 – by a single individual, Mr. Cotten and it appears that Quadriga failed to ensure adequate safeguard procedures were in place to transfer passwords and other critical operating data to other Quadriga representatives should a critical event materialize.”


The question around the missing hot and cold wallets was also addressed by E&Y. Cotten ensured that the cryptocurrencies belonging to users were not stored in the exchange’s hot or cold wallets, but transferred them to his “personal accounts” on competitor exchanges.

Further, these stolen cryptocurrencies were traded on exchanges and even used as security for margin trading, employed by Cotten which resulted in severe trading losses and the same being liquidated.

The report added that a significant chunk of the cryptocurrencies were transferred to wallet holders whose ID could not be confirmed by the monitor at the time.

Cotten played the long waiting con-game with the exchange by setting up several “Identified Accounts” under aliases so that it would seem that the “Unsupported Deposits” saw some inflows and hence, could trade on several platforms. E&Y stated that this would result “in inflated revenue figures, artificial trades with Users and ultimately the withdrawal of Cryptocurrency deposited by Users.” The report added,

“Substantial Funds were transferred to Mr. Cotten personally and other related parties. The Monitor has not located any support justifying these transfers.”

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