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The QuadrigaCX cryptocurrency exchange says it can't access some $190 million in bitcoin and other funds after its founder and CEO, Gerald Cotten, died at age 30 — without sharing the password for his encrypted laptop.
Cotten was "the sole officer and director" of the Canadian cryptocurrency exchange when he died, said his widow, Jennifer Robertson, in an affidavit that is part of the company's request for court assistance as it seeks protection from its creditors.
The debt filing comes weeks after Robertson announced that Cotten had died — an event she described as "a shock to all of us."
Robertson, who is executor of Cotten's estate, also announced that Quadriga has put new limits on daily withdrawals, trying to keep pace with demand and resolve transaction problems that lingered through much of last year.
In an update on its website about the debt filing, the exchange says it is facing "significant financial issues" that are keeping it from disbursing customers' funds.The company says that it has "very significant cryptocurrency reserves" — but that it can't locate or secure those reserves.
As of the end of January, Quadriga had some 115,000 users with balances in their accounts, Robertson said. Those users' cryptocurrency was valued at $137 million in mid-December, with another $53 million in the form of government currency. The bulk of the holdings are in bitcoin; smaller amounts are held in other popular cryptocurrencies, including Litecoin and Ethereum.
Even before Cotten's death, Quadriga was struggling to cope with transaction delays and other problems after legal disputes with a large bank and payment processors resulted in tens of millions of dollars being frozen.
In large part, Quadriga's biggest crisis lies in how it (as well as many other exchanges) stores cryptocurrency customers' funds — in "hot wallets" that are used for quick-turnaround withdrawals and payments and in "cold wallets" that are stored offline to protect them from thieves and hackers.
Similar to how bank customers might split their checking and savings accounts, the cold wallets hold far more money; they are tapped only when hot wallets run low or when a user wants to make a large withdrawal. What is particularly problematic for Quadriga is that its CEO seems to be the only person who held the keys to those transactions.
Another one bites the dust. Some people think its an exit scam. Apparently dude only filed his will like 12 days before his "death" and left no instructions on the cold bitcoins. People say you can also buy fake death certificates in India too......
The Federal Bureau of Investigation and the Royal Canadian Mounted Police are said to be looking into the implosion of Quadriga, a cryptocurrency exchange that has been unable to account for at least $136 million in customer funds since the mysterious death of its 30-year-old CEO in December.
Jesse Powell, the CEO of crypto exchange Kraken, said that both law enforcement agencies have been in touch with his company in recent weeks as part of an effort to determine what happened at Quadriga, which is currently seeking court protection from creditors in Canada.
The inquiries are the latest twist in a strange tale that has gained a flurry of media attention since Quadriga announced in January that CEO Gerald Cotten had died. The news of the death, which came a full month after Cotten reportedly died in India, came with a statement that only Cotten possessed the private keys to access large reserves of customer cryptocurrency—implying the funds were now gone forever.
Quadriga’s explanation, which was akin to a bank saying it had misplaced most of its money, drew immediate scrutiny from the media and on sites like Reddit, where some users have questioned if Cotten had faked his death.
Kraken’s Powell told Fortune in an interview he does not believe Quadriga that Cotten ever transferred the $136 million in funds to so-called cold storage, a term that describes putting cryptocurrency on hardware devices not connected to the Internet. Instead, Powell claims, and cryptocurrency news site Coindesk supports, that examinations of the blockchain—the public ledgers that serve as a transaction record for currencies like Bitcoin and Ethereum—suggest someone moved the missing Quadriga funds to Internet-connected “hot wallets” on other exchanges.
In response, Kraken has announced a $100,000 reward for information on what happened to the missing funds. Powell said the decision to post the reward is partly to help Kraken customers who lost funds on Quadriga, and also because the debacle reflects poorly on the cryptocurrency industry. Powell also believes the FBI and RCMP could learn more about what took place by issuing subpoenas to other crypto exchanges, which reportedly received funds from Quadriga at the time it was imploding.
According to Coindesk, blockchain records indicate that exchanges receiving Quadriga funds on the eve of its collapse include Binance, Bitfinex and Poloniex.
Suspicions began to swirl around Quadriga almost immediately after its collapse. Some of these centered on Cotten’s decision to file a will 12 days before his death, according to court documents cited by Bloomberg, leaving millions of dollars in assets to his wife, Jennifer Robertson, and made her executor of his estate.
The controversy surrounding Quadriga only mounted after its court-appointed monitor Ernst & Young disclosed that someone at the exchange had “inadvertently transferred” 103 Bitcoins worth nearly $500,000 to a cold storage wallet as part of the court proceedings. For now, those funds too are gone.
Quadriga has also made a number of other unusual decisions related to its business practice and corporate structure since its inception. (Journalist Amy Castor has created a full timeline of notable Quadriga events).
Meanwhile, the Globe & Mailreported on Thursday that the man who co-founded Quadriga along with Cotten is a convicted felon who served time in the U.S. for his role in an identity theft ring. The Globe also said that the man, Michael Patryn, had been living under another identity at the time of his American crimes, which included dealings with Liberty Reserve, a now-shuttered website that used digital currency to launder money. Despite the Globe presenting him with seemingly incontrovertible evidence that he is the same person who went to prison for those crimes, Patryn told the paper he disagreed with its conclusion.
All of this will likely provide fodder for any formal criminal investigation. In the meantime, others in the cryptocurrency have been performing forensic examinations of their own. These include Coinbase, whose CEO Brian Armstrong recently concluded that Quadriga suffered a “multimillion dollar bug” in 2017, which put the company in a financial hole. Armstrong speculated on Twitter that Quadriga executives may have tried to trade their way out of the predicament and then used Cotten’s death as a pretext to pull the plug on the operation.
As for Cotten’s reported death, the Globe dispatched journalists to India—where fake death certificates are reportedly easy to obtain—who heard from local sources that the CEO was admitted to a hospital with stomach pains, and eventually died of cardiac arrest. In a seemingly odd procedure, Cotten’s body was handled by hotel staff after an embalmer refused to receive it. His widow reportedly returned with it to Canada.
While there is no persuasive evidence Cotten faked his death, it is unclear whether anyone at a Nova Scotia funeral home that handled his service saw his remains. The funeral home, JA Snow, issued a “statement of death” but Kortney Adams, an executive with the association that oversees funeral homes in the province, told Fortune that such statements can be issued on the basis of a foreign death certificate. Media representatives for the corporation that owns JA Snow did not respond to two requests for comment.
Executives at Kraken say they have been in contact with people who attended Cotten’s closed-casket funeral, and that his family appeared to be genuinely grief-stricken. Powell, for his part, says he is “99% certain” Cotten is dead.
Experts finally cracked the laptop of the crypto CEO who died with sole access to $137 million. But the money was already gone.
Mar. 6, 2019
Millions of dollars were missing when the CEO of a crypto exchange died without sharing the passwords to his accounts. Investigators recently cracked his laptop — only to find the money was gone.
Gerald Cotten, the founder of QuadrigaCX, was thought to have had sole access to the funds and coins exchanged on it. After his death in December, his colleagues said that about $137 million in cryptocurrency belonging to about 115,000 customers was held offline in "cold storage" and inaccessible.
The case has sparked numerous theories, including that Cotten faked his own death and ran off with the cash. A court-appointed auditor, Ernst & Young, was able to crack Cotten's laptop and found that the accounts were emptied in April, eight months before his death, it said in a report last week.
"In April 2018, the remaining bitcoin in the Identified Bitcoin Cold Wallets was transferred out bringing the balances down to nil," the report said.
The investigators said they found other issues too, such as that Quadriga kept "limited books and records" and never reported its financials.
Ernst & Young also said it found 14 user accounts linked to Cotten that traded on Quadriga's exchange and withdrew cryptocurrency to addresses not tied to Quadriga.
Twitter CEO Jack Dorsey buying $10,000 in bitcoin each week as he predicts 'massive' price rise
Mar 6, 2019
Twitter CEO Jack Dorsey has revealed he is spending thousands of dollars a week on bitcoin in anticipation of a major turnaround for the cryptocurrency market.
Mr Dorsey, who is also the founder and CEO of mobile payments company Square, has been a vocal advocate of the cryptocurrency since 2017 but had never before spoken about his own holdings.
Speaking on the Tales from the Crypt podcast, Mr Dorsey explained how he became fascinated by bitcoin two years ago due to its potential for disrupting payments and the broader financial industry.
During the 30-minute interview, Mr Dorsey revealed that he had maxed out the $10,000 spending limits on his company's application Cash App in recent weeks.
A recent trend on Twitter known as Stack Sat Saturday has seen fellow bitcoin enthusiasts buy $25 worth of the cryptocurrency every Saturday.
"I saw that on Twitter," Mr Dorsey said. "I would have participated but I've already exceeded my limit."
Ultimately, Mr Dorsey said he believed that bitcoin or another cryptocurrency would become the "native currency" of the internet that has the same borderless and global reach as the internet itself.
The Square CEO added that his payments company is actively researching and developing ways to support the bitcoin community and help make it happen.
Most Bitcoin Trading Faked by Unregulated Exchanges, Study Finds
March 22, 2019 9:00 a.m. ET
Nearly 95% of all reported trading in bitcoin is artificially created by unregulated exchanges, a new study concludes, raising fresh doubts about the nascent market following a steep decline in prices over the past year.
Fraudulent trading volume has dogged cryptocurrency trading for years, but the extent of the market manipulation has been difficult to determine. Bitwise Asset Management said its analysis of trading activity at 81 exchanges over four days in March indicates that the actual market for bitcoin is far smaller than previously thought.
The San Francisco-based company submitted its research to the U.S. Securities and Exchange Commission with an application to launch a bitcoin-based exchange-traded fund. The study, made public Thursday, is an attempt to alleviate the agency’s longstanding concerns that a bitcoin ETF would leave investors exposed to fraud and market manipulation.
Bitwise’s fund, if approved, would be based upon the 5% of trading it considers legitimate, said Matthew Hougan, Bitwise’s head of global research. That volume comes from 10 regulated exchanges that can verify that their trading data and customers are real. This slice of the market, he said, is well regulated, transparent and efficient.
The study adds to a growing body of research that casts doubt on just how much cryptocurrency is changing hands daily. Last week, research firm Crypto Integrity said it concluded that 88% of all trading in February had been inflated. The TIE, another cryptocurrency researcher, on Monday estimated that 75% of exchanges had some form of suspicious activity occurring on them.
Bitwise created a program to collect and analyze trading data across 81 exchanges, looking for patterns that exemplified both real and artificial trading. It concluded that 71 of the 81—or 95% of reported volume—are questionable, with patterns that indicated the trading on them appears manufactured.
Of the roughly $6 billion in reported daily volume during four days in March, the firm calculated that about $273 million was legitimate.
On regulated exchanges such as Coinbase, Gemini, BitFlyer and Poloniex, trading followed certain patterns, according to the Bitwise report. Trading volume, for example, rose and fell at predictable times coinciding with working and sleeping hours. Smaller trades were more frequent than larger ones, and many were in round numbers. All those patterns reflect how human traders think and act.
By contrast, the dozens of unregulated exchanges that have cropped up over the past year show different trading patterns. Buy and sell orders appear in pairs, with one neutralizing the other. Trades are almost always executed within bid and ask prices, indicating a lack of the more haphazard decision-making one would expect from human traders. There are very few small or round-number trades. Volume is consistent across the trading day.
The unregulated exchanges also show massive volume. Coinbase, the largest of the regulated exchanges, had average daily volume of around $27 million in the first week of March, when Bitwise collected its data. By comparison, CoinBene, a newer exchange that first appeared in October 2017, reported $480 million in daily volume over the same period. Yet CoinBene’s website attracts far less traffic than Coinbase, which is in 55,097th place by Amazon’s Alexa ranking service, compared with 1,500th for Coinbase.
Estonia-based Bibox, another exchange Bitwise alleges manufactures trades, said it has about 100,000 daily users on its site. “Every transaction on Bibox is accessible to anyone interested,” said Bibox’s director of operations, Meilun Li.
In the study, Bitwise suggests that the unregulated exchanges are inflating trading volume to get a higher ranking on data services like CoinMarketCap and leverage that ranking to attract listing fees. CoinBene lists nearly 200 tokens. Bibox has about 180.
Facebook's Cryptocurrency: Everything We Know So Far
June 17, 2019
Facebook's long-rumored cryptocurrency is about to get its big debut. The formal launch is expected sometime in 2020 after a testing phase later this year, but the social network is gearing up to officially announce it with a white paper on Tuesday laying out the basics of its crypto token. Here's everything we know so far.
Hedge funds and other big traders are betting that bitcoin will fall, even as the digital currency has risen above $11,000 on a new wave of crypto-optimism.
That is the picture that emerges from bitcoin futures listed on CME Group Inc., the biggest U.S. exchange operator. Futures are contracts that let traders bet on whether an asset—in this case, bitcoin—will rise or fall.
Hedge funds and other money managers held about 14% more bearish “short” positions in CME bitcoin futures last week than they did bullish “long” positions, according to a recent Commodity Futures Trading Commission report.
Other large traders were even more bearish. “Other reportables” — a loose category of firms that don’t necessarily manage money for outside investors — held more than three times as many short positions in bitcoin futures as long ones, the CFTC report shows.
So who is the optimist? The report shows it is mostly small investors taking the other side of the trade. Among traders with fewer than 25 bitcoin contracts, a category that likely captures many individuals placing bets in bitcoin, long wagers outnumbered short bets by 4 to 1.
The CFTC report, which came out Friday, reflected the positioning of market players on June 18, when one bitcoin could buy around $9,000. The cryptocurrency was trading at $11,379.96 late Tuesday afternoon, up 4.6% from the day before.
Though it comes with a lag, the weekly CFTC report offers a glimpse into how various types of traders are positioned in bitcoin futures. Commodity traders closely follow similar CFTC reports on futures like crude oil, wheat and corn for hints of what is driving the market.
The CFTC data shows that hedge funds have been short bitcoin since February, though they recently pared their bearish bets.
On June 11, short bets among hedge funds outweighed long bets by 47%, a gap that narrowed to 14% the following week.
Such data don’t necessarily mean hedge funds are placing outright bets that bitcoin will drop. The short bets could also be part of hedging strategies: for instance, a fund with a portfolio of bitcoins might go short at CME as insurance against the value of bitcoin dropping.
Trading activity has grown in CME’s bitcoin futures in recent months, along with the rebound in bitcoin’s price. In May, average daily trading volume in the CME contract hit a record $515 million, the exchange operator says.
Should we be expecting GPUs to go out of stock again? I know they aren't used for Bitcoin, but they are still good for Ethereum? Wondering if now is the time to pick up some NVDA?
02-07-2019, 02:20 AM
