What Happened to QuadrigaCX? We Explain Here
With around C$28 million in assets and C$215.7 million in liabilities, QuadrigaCX filed for bankruptcy in 2019 after ceasing operations of the exchange. Under the Companies’ Creditors Arrangement Act, Quadriga was given temporary legal protection from its creditors, and EY was appointed as an impartial monitor.
Gerald Cotten, who was born on May 11th, 1988, grew up in Belleville, Ontario, and then moved to Toronto to enrol at the Schulich School of Business at York University. In 2010, he received his bachelor of business administration from York. In November 2013, he and Michael Patryn created Quadriga in Vancouver, British Columbia, where he first learnt about Bitcoin.
Working with Patryn, the company made an effort to raise capital and list on the CSE. Despite raising C$850k, the company decided against going public on the exchange in 2016. Quadriga had four employees and offices in Toronto and Vancouver in 2015, but by June of that year, they were out of cash.
Solid Accounting Systems
In 2017, there was a speculative frenzy that saw the price of Bitcoin soar from roughly $1,000 to almost $20,000. Due to the exchange’s dependence on outside payment processors and the absence of a solid accounting system, the significant growth in volume increased commissions but also resulted in cash flow issues. In June 2017, Quadriga said that a smart contract error has cost them Ethereum valued US$14 million.
Customers of the exchange noticed delays when seeking to withdraw dollars throughout 2018, as the price of Bitcoin fell. The Canadian Imperial Bank of Commerce froze C$28 million held by Costodian, a Quadriga payment processor, in January 2018. According to CIBC, they were unable to reach Cotten or Quadriga and could not determine who owned the money. Costodian and Quadriga were unable to get access to the money.
The U.S. Securities and Exchange Commission is suing Michael Gastauer, the CEO of WB21, for his alleged involvement in a US$165 million fraud.
Decentralised Public Database
Gerald Cotten, the CEO of Quadriga, passed away from Crohn’s disease while volunteering at an orphanage in India, the company reported on January 14, 2019. According to blockchain researchers, there is no proof of Quadriga’s cold wallets on the blockchain, which is a decentralised public database for cryptocurrencies.
The Ontario Securities Commission declared Quadriga to be a Ponzi scheme and a fraud in June 2020. Gerald Cotten defrauded Quadriga by establishing accounts using aliases, crediting himself with phoney currency balances, and trading crypto assets with unwitting consumers.
On February 6, 2019, EY revealed that US$354,300 worth of bitcoin were “accidentally” deposited to a cold wallet that was inaccessible.