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The Almighty Buck

Software Engineer Loses Life Savings in Quadriga Imbroglio (bloomberg.com) 358

Tong Zou wasn't a stereotypical crypto bro bent on accumulating flashy trophies such as Lamborghinis when he deposited his life savings into Quadriga CX's digital exchange. The 30-year-old software engineer, who'd been working in California for seven years, just wanted to save a few bucks on transfer fees after deciding to move to Vancouver. It proved to be a C$560,000 ($422,000) mistake. From a report: "It's all my savings, so I'm just living on what little I have left and trying to start over," Zou said in a phone interview Friday from Vancouver, where he has been living out of an AirBnB for the past month. "It pretty much took everything away from me." Zou is one of Quadriga's 115,000 clients who are out of luck after the sudden death of the firm's founder left C$190 million in cryptocurrencies protected by his passwords unretrievable. The exchange has halted operations and was granted protection from creditors on Feb. 5 in Nova Scotia Supreme Court in Halifax.
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Software Engineer Loses Life Savings in Quadriga Imbroglio

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  • Wasn't the most recent news that there were suspicious circumstances about how much $ was in the coin purse, and whether the guy actually died or was had his death faked?
  • by alvinrod ( 889928 ) on Monday February 11, 2019 @01:55PM (#58105060)
    It doesn't matter what you're doing, but there is an old saying about not keeping all of your eggs in one basket. Sometimes even incredibly intelligent people are capable of horrible foolishness.
    • There's also this thing we saw in 2008 where a bunch of "financial innovation" was happening. Apparently "financial innovation" is just getting around all the safety rails the regulators put up so shit like this doesn't happen.

    • Sometimes even incredibly intelligent people are capable of horrible foolishness.

      Intelligence and wisdom are not the same thing. I'm not sure there's even a strong correlation between the two.

    • It doesn't matter what you're doing, but there is an old saying about not keeping all of your eggs in one basket. Sometimes even incredibly intelligent people are capable of horrible foolishness.

      Yea, I've done some stupid stuff with my money too. This guy learned his lesson I suppose, shame about the money he lost, but as the saying goes, "A fool and his money are soon parted" to which I add, "especially for greedy fools." I suppose it could have been worse, he could have sunk it into cash and moved it that way. I don't feel too sorry for him, he took his chances and lost on a really strange turn of events.

      When you take your chances to avoid a couple of bucks of fees, you MIGHT want to consider a

  • Tax evasion? (Score:3, Insightful)

    by Anonymous Coward on Monday February 11, 2019 @01:57PM (#58105076)

    Because that sure sounds like a possibility. While he can't get the money back now, I hope the IRS and the Canadian equivalent are looking at this closely, since this is INTERNATIONAL commerce, not just interstate commerce, and deserves all the scrutiny it can get so people understand the consequences of flaunting the rules.

    Losing the money is bad, but having it publicized you were dodging taxes while fleeing the country in the process....

  • by forkfail ( 228161 ) on Monday February 11, 2019 @01:59PM (#58105088)

    He used this cryptocurrency in an attempt to get around the laws and banking regulations of the US and Canada, and now we're supposed to feel sorry for him?

    I mean, it's always sad when folks lose everything. But it's not like this guy was particularly innocent in what he was doing.

    • by ddtmm ( 549094 ) on Monday February 11, 2019 @02:04PM (#58105156)
      What was illegal about it? He purchased crypto with USD, then was going to sell it in CAD. That's perfectly legal and is a method used in buying/selling foreign stocks.
      • The thing is that should essentially be a same-day transaction, if not a single transfer with a transparent step in the middle. The story doesn't make a whole lot of sense to me-- saving even 1% in total fees is only $4kUSD, but for a transaction like that I would expect to be closer to 0.3% fees. Sure, it is a nice chunk of cash, but it is like the stupidity of doing the transaction in gold coins taped to your body as you fly.

        For anyone doing this in the future, the smartest approach is generally to move

      • by bradley13 ( 1118935 ) on Monday February 11, 2019 @03:03PM (#58105618) Homepage

        You're perfectly right, if that is what he intended.\

        His is a strange story. He says he wanted to just use the exchange to transfer his money - all $500,000 at once. That's a really strange choice: he is going through a third currency, meaning two transactions rather than one. The fees are going to be much higher than just an ordinary bank-to-bank transfer, plus that third currency is extremely volatile, meaning he has a lot of additional risk.

        Then we have the "all your eggs in one basket" argument. With a traditional bank, that might not be a problem, but with an exchange? After Mt. Gox anyone in the IT world should understand that exchanges cannot be trusted. Multiple transactions, waiting for each one to go through before initiating the next. Or multiple exchanges. Or just leave his money in the US. Or his own offline wallet. Or, really, anything except what he actually did.

        tl;dr: His story doesn't pass the sniff-test. I'm not sure what he was really doing, but it seems very likely that he was trying to bypass official notice of the assets - either their departure from the US, or their arrival in Canada. I wonder: did he make this money with crypto-speculation? And, perhaps, had never paid taxes on it?

        OTOH: reality sometimes is stranger than fiction, and sometimes people really do just have brain farts...

        • plus that third currency is extremely volatile

          I had many of the same thoughts you did, but especially this one I don't see questioned my many other people - moving 500k into BTC or the like, even if only for a day is a huge risk in terms of volatility. What if that is the day BTC decided to take a 20% drop just for fun? In fact you can almost be sure that speculators noting such a large volume of purchase would figure out some way to screw the guy short term to make him panic and sell...

          I still see BTC as

      • What was illegal about it? He purchased crypto with USD, then was going to sell it in CAD. That's perfectly legal and is a method used in buying/selling foreign stocks.

        If you export certain amounts of money out of the USA, the law requires you to report it to the US government. He was way past the limit with his over $400,000. The limit is, I think, $10000 USD. Canada may have laws that if you import certain amounts of money, this must be reported to their government, but as I'm not Canadian I can't speak to what their limits may be. He was trying to be clever and get around any reporting requirements so that his money just magically changed from US to Canadian dolla

      • by darkmeridian ( 119044 ) <<moc.liamg> <ta> <gnauhc.mailliw>> on Monday February 11, 2019 @03:39PM (#58105916) Homepage

        But why didn't he just ACH his money directly from one bank account to another? Or write himself a check? As far as I know, those are both very low cost or no cost if they really want your business.

    • by Mashiki ( 184564 )

      That's what they're trying to pull. Funny enough that if you do it legit and disclose to revenue canada(without the transfers OoC), they generally waive cryptomining unless it crosses the $1m threshold then they want a cut of it. You can even do this with XE's(currency trading), unlike in the US where they want a cut of every transaction.

    • by hey! ( 33014 )

      Actually, he was trying to avoid bank currency conversion fees, which run from 1% to 2.5% when converting US dollars to Canadian.

      This is known as being penny-wise and pound-foolish.

  • by Waffle Iron ( 339739 ) on Monday February 11, 2019 @02:01PM (#58105114)

    At least he avoided losing his life savings because of a collapse of the global banking system.

    • That's basically what happened. We have all kinds of protections against regulated bank collapses, but not against this.

  • Before investing your life savings into something, it would be wise to do a lot of research into what you're doing. With all the disaster stories from Bitcoin (Mt. Grox) you'd think someone would at least look into history to realize that although there might be legitimate Exchanges, some are completely unregulated scams as well.

  • If you don't hold your own keys, you don't hold your own crypto. Clearly not a "crypto bro." should have held this coins on a hardware device.
    • Re: (Score:2, Informative)

      by Anonymous Coward

      He wasn't letting his crypto sit on QuadrigaCX, and likely didn't have it there as crypto for any more than a few minutes. He wanted QuadrigaCX's crypto$$$ exchanges to help him buy the crypto with USD (he either deposited USD into QuadrigaCX, or first purchased crypto using USD elsewhere which he then transferred to QuadrigaCX), and sell it for CAD.. and then the idea was that QuadrigaCX would transfer his CAD (as a 'withdrawal' from QuadrigaCX) to his CAD bank account. I didn't read this particular articl

  • The great thing about cryptocurrency is that we no longer need centralized entities such as banks or exchanges. Why not keep all that digital cash in one or several wallets that you control? What would possess someone to send it instead to a completely unregulated, unsupervised and unvetted exchange that turned out to be one guys server? I'd get nervous about moving a couple 100k between banks - proper banks.
    • Why not keep all that digital cash in one or several wallets that you control?

      Perhaps he was in a situation similar to one I was in a while back. I purchased a small amount of bitcoin on a whim, and decided I would stick it in an offline wallet. That's when I discovered that the exchange would have charged a significant fee to transfer it out. From what I understand, these transactions fees are variable, and can get quite high depending on circumstances. You basically have to pay someone to perform the blockchain calculations for your transaction.

  • by Kethinov ( 636034 ) on Monday February 11, 2019 @02:08PM (#58105194) Homepage Journal

    I love how cryptocurrency is like a history lesson for Libertarians with regressive economic attitudes. They get to learn the hard way why each discrete financial regulation we have today was enacted.

    • Re: (Score:2, Insightful)

      They'll just blame everyone but themselves for their own stupidity; then when it happens to them they'll complain that the government is obviously at fault because all its regulation pushed people into the unregulated mess.

    • Come on (Score:2, Informative)

      by SuperKendall ( 25149 )

      They get to learn the hard way why each discrete financial regulation we have today was enacted.

      It's not like countless people have not lost money from highly regulated banks as well.

      I've lost way more money on bullshit fees and predatory practices than I've ever lost through cryptocurrency. At least there I can be in some control over maintaining my own wallet if I wish.

      • Credit Union. No BS fees, highly regulated, insured, professional, not bullshit like crytpocurrency.
        • Credit Union. No BS fees

          I use a few credit unions myself but they are hardly immune from bullshit fees (just not as many). $25 every time I do a wire for a SEP contribution really irks me, for example.

          Also my credit union just implemented some stupid rule you can only transfer $1k per day, meaning that for many practical personal transfers I literally have to withdraw cash, and drive it to another bank to get it transferred in a timely manner. Stupid.

    • I love how you think libertarians are going to draw your strawman inference or feel your strawman way.

      I expect what a true libertarian (as I *am* one) would say is: right now he's Emptor'ing his Caveat.

      "Tong Zou wasn't a stereotypical crypto bro bent on accumulating flashy trophies such as Lamborghinis when he deposited his life savings into Quadriga CX's digital exchange. The 30-year-old software engineer, who'd been working in California for seven years, just wanted to save a few bucks on transfer fees af

  • by hdyoung ( 5182939 ) on Monday February 11, 2019 @02:27PM (#58105322)
    I'm not sure "saving on fees" was the real motivation here. Tax avoidance sounds a lot more likely. In any case, ouch. Note to all 30 year olds: just because you're smart in one area doesn't mean you're master of all. Be careful. What you don't know CAN hurt you. Hard lesson to learn but I'm not sure which lesson is relevant here.

    If the guy was just trying to save bank fees, then the lesson is "banks exist and charge fees for a reason and now you know why".

    If he was trying to avoid taxes, the lesson is "you want to operate outside the law you better be ready for the wild, wild west, baby!".
    • I'm not sure "saving on fees" was the real motivation here. Tax avoidance sounds a lot more likely. ...

      As I mentioned elsewhere, Nerdwallet lists the average international bank wire fees [nerdwallet.com] as $45 outgoing and $13 incoming, so he risked $422 US to save $58.

      I hadn't considered tax issues, if there are any. A post on a CanadaVisa site forum says:

      Transferring money between US and Canada is fairly simple. Several Canadian banks have the ability to open a US based account with the same or partner bank. Transfers between your accounts are then very simple. I would suggest that you speak to an accountant with experience in crossborder taxes.

    • He already paid U.S. taxes on all the money when he earned it in the U.S. And there's no Canadian law requiring you to pay any Canadian taxes on money you bring into the country.
  • When one person holds the key to your wealth it better be you personally.

    How many users were aware that a single person controlled a key that if lost would wipe out their money?

  • Bwahaha this guy's an idiot! When you have 6-digit amounts of money, you don't put such a large fraction of it in any one bank, never mind in some sketchy-ass cryptocurrency exchange! His net worth must've been all over the fucking place since it was basically tied to cryptocurrency values! Did he look at his life savings losing and earning (but mostly losing) the value of a high-end sports car every day and think "Yes, this is fine"!?

    Oh, and there's the fact moving such quantities of money through such una

  • If you're going to invest in crypto currencies, then, you better be prepared to lose it all. It's no different than if you invested all your money in one company's stock and then that company went belly up the next day. Crypto currencies are not banks or credit unions, they are most likely not insured like a bank/credit union inside the US would be.
  • I'm not one to say I told you so, but...

    https://youtu.be/9AajslFuPro [youtu.be]

  • To have $422K by the time you're 30 is pretty good.
  • He was supposedly just moving money around (was it legal? I don't know), but I wouldn't give that amount of money to some unknown, startup company even for a millisecond. That amount of money only gets moved around from credit union to credit union with wires, as far as I'm concerned. I wouldn't even do a cashier's check for that amount of money.
  • At least from the tone of the article, it doesn't sound like he is playing the pity card or blaming anyone but himself, so I'll give him credit for that.

    There are much safer while still being cheaper ways of exchanging money using securities, usually using dual listed ETFs like DLR(.TO). Maybe not as cheap as this scheme, but the only real risk is if the exchange rate goes to shit during the week or so this all takes, compared to the colossal risk associated with anything crypto related.

  • by Anonymous Coward

    It seems all(?) commenters here think, the owner is really died!

    Look at how public interest in cryptocurrencies died (for a while now)!
    Is it really hard to guess that the business was going bad for a while & the owner decided to runaway w/ all customer money, instead of declaring bankruptcy?

    Why the owner decided to go to India?
    Supposedly, "to build an orphanage"! :-)

    Is it hard to guess he went there because it was cheap/easy to buy a fake dead certificate?

    If he is really dead then where is the body?
    Is a

  • He should have known a Quadriga Imbroglio was a bad place to stash his life savings - Alfa Romeos are notoriously unreliable.

  • pound foolish. Why would a smart person risk that much money on something as notoriously unreliable as bitcoin just to save a few $ in wire transfer fees?

"The vast majority of successful major crimes against property are perpetrated by individuals abusing positions of trust." -- Lawrence Dalzell

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