Crypto-Exchange Says It Can’t Pay Investors Because Its C.E.O. Died, and He Had the Passwords
He noted that various online sleuths had been searching the blockchain, a ledger that can be updated by decentralized networks, for evidence of where Quadriga had stored its assets, but had found none, which raised red flags.
When it shut down, Quadriga’s platform had 363,000 users, and 115,000 of them had balances in their accounts: about $180 million in cryptocurrency and $70 million in Canadian currency, the court documents state. The exchange enabled trades of Bitcoin, Litecoin and Ether, plus other types of cryptocurrency. The largest user claim was valued at about $70 million.
Quadriga was one of 237 widely recognized public cryptocurrency exchanges worldwide, Dr. Sirer said. In terms of daily trade volume, it was ranked in the middle of the pack as of October, according to the website CoinMarketCap.
The exchange kept currency in “hot wallets,” which were connected to the internet and could quickly fulfill withdrawal requests, and “cold wallets,” which were kept offline and stored physically, such as on a USB stick, making them more secure, according to court papers.
Ms. Robertson wrote in her affidavit that after her husband’s death, his employees tried to get into the cold wallets but failed or found only small amounts of money. Other cryptocurrency investors, on social media and in interviews, questioned why a chief executive would be the sole point of access to such a vast sum.
In an initial report to the court, Ernst & Young wrote that it was facing an extraordinary set of case facts. Quadriga had no discernible accounting system and no bank account, according to the filing. Mr. Cotten typically sent directions to release payments, which were made through third-party payment processors, to employees by email, and payment inflows and outflows “were not systemically tracked,” Ernst & Young wrote.
The court papers state that the company has substantial assets in various cryptocurrencies and that unreleased bank drafts in the company’s name total about $30 million, with $375,000 in cash held by others. Several firms have come forward with offers to buy the business, which could be valuable to competitors, the papers state.