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Bitcoin Businesses The Almighty Buck

QuadrigaCX's Crypto Accounts Were Emptied Months Before CEO's Mysterious Death, Putting Fate of $137 Million In Doubt (businessinsider.com) 166

Posted by BeauHD from the truth-will-prevail dept.
An anonymous reader quotes a report from Business Insider: 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.

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. Burdened with $190 million in debt and unable to find or access the money, Quadriga filed for creditor protection in late January. A Nova Scotia court threw the company a lifeline this week, granting it a 45-day extension that prevents creditors from filing lawsuits against it until mid-April.
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QuadrigaCX's Crypto Accounts Were Emptied Months Before CEO's Mysterious Death, Putting Fate of $137 Million In Doubt More

QuadrigaCX's Crypto Accounts Were Emptied Months Before CEO's Mysterious Death, Putting Fate of $137 Million In Doubt

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  • Alt headline: (Score:5, Insightful)

    by Dallas May ( 4891515 ) on Wednesday March 06, 2019 @10:35PM (#58229312)

    "So, you decided to invest in fake crypto-crime money and trusted it's safe keeping with a stranger..."

    • So you might be wondering how does one make $115 Million just vanish. First I'll assume they already have ruled out the obvious that it's just spent on lavish lifestyles or sitting in the accounts of the executives.

      So where did it go? I speculate it never existed. How? Well imagine this, someone invests $1000 in the exchange when bitcoin is $1/coin. The exchange runner, steals all of it, but continues to tell the client that they own 1000 bitcoins. The the price of bit coin goes up 1000 fold. That 10

  • That cryptocurrency is fools gold

    Don't throw money into this that you cannot lose because you will.

    • No. While cryptocurrency is fools gold this proves nothing of the sort.

      All this proves if you give all your money to some shady unregulated 3rd party there's a risk you may lose it.

      • Re: (Score:2)

        by ceoyoyo ( 59147 )

        Modern money isn't bits of metal or paper, it's a system. That system includes banks, exchanges, and payment systems, and, importantly, a system of regulation and checks that keep the whole thing (mostly) honest.

        Bitcoin is kind of like money, except it's missing most of that system. There's nobody to give your money to except shady unregulated third parties.

        Many proposals for dealing with some of bitcoin's other problems involve depending even more on those shady unregulated third parties.

  • So you don't trust banks? (Score:5, Funny)

    by Applehu Akbar ( 2968043 ) on Wednesday March 06, 2019 @10:41PM (#58229340)

    See how much better off you are converting your life savings into an online hoarding token whose value changes daily, and then entrusting your hoard to an AC on the Internet.

    There's a job waiting for you: Finance Minister of Venezuela.

    • Oh no, not quite qualified. I would think with all the massive volumes of crypto coin we'd need someone used to handling orders of magnitude more money; I hereby nominate the Finance Minister of Zimbabwe

    • Re:So you don't trust banks? (Score:5, Insightful)

      by Bert64 ( 520050 ) <.moc.eeznerif.todhsals. .ta. .treb.> on Wednesday March 06, 2019 @11:29PM (#58229442) Homepage

      Well the whole point of crypto is that you can hold it securely yourself without having to rely on third parties, so trusting it to a third party is stupidity on the part of the user not an inherent problem of crypto.

      • What do you mean, without relying on third parties? Blockchainhyperledgerwhateveryoucallit are required to keep track of transactions, all of which must by design run by third parties. The only way you can not rely on third parties is to have your own cryptocurrency that no one uses, and given that there are more cryptocurrencies than there are countries, that's the way things are going.

  • Well DUH! (Score:5, Interesting)

    by Anonymous Coward on Wednesday March 06, 2019 @10:43PM (#58229346)

    The rest of them are likely involved too. Since there is no way that company could run if all transactions had to be done via its CEO and the CEO leaves for India, and nobody raises a red flag, and somehow the company can continue to run without access to its funds, and no financial books, and so on.... lots of red flags with the whole operation.

    He'll be found and arrested soon enough. He won't be dead, and won't be in India. He'll be in Canada or the USA not far from his wife.

    • He'll be in Canada or the USA not far from his wife.

      With $137M, he can afford a new wife.

    • Is going to India a euphemism for hiding? What is the source of this? Because it is way harder to hide in India if you are white and it is way easier to hide in Belize.

      • No his wife reported that he died in India. If he faked his death, I suppose that he thinks it is easier to fake a death in a foreign country that is 3rd world in places. If he died in the U.K. or France or Germany, it would be way easier to verify.

    • Re: (Score:3)

      by AmiMoJo ( 196126 )

      He doesn't really have $137M though. He has cryptocurrency that is worth around that amount, or at least was before this happened and people lost faith in it.

      Converting that into usable currency is not going to be easy, especially as the ledger is public. He will need to launder it. Obviously taking out millions is going to be a massive red flag now.

      Someone didn't think this through.

      • Re:Well DUH! (Score:4, Informative)

        by hey! ( 33014 ) on Thursday March 07, 2019 @10:12AM (#58231100) Homepage Journal

        He *had* cryptocurrency valued at 137 million. Which means he could have grand old time ordering stuff you can buy with cryptocurrency. But as soon as he tries to convert that asset into something substantial like a house, a boat, or a car he'll be leaving traces.

        Hiding liquid assets is not a new thing. And it'd be really easy to escape the law *if you never tried to use those assets for anything but hiding*. Cryptocurrency is surely an advance from the point of view of money laundering, but it's not a panacea.

      • It would have been a flag if he converted all the Bitcoins at once right now, but the story details that the accounts were emptied months ago and the auditors know of at least 14 previously unknown accounts. Who knows how many other accounts exist. He could have created hundreds of accounts to then convert the Bitcoins to other currencies.

        • Re: (Score:2)

          by AmiMoJo ( 196126 )

          Indeed, splitting funds into multiple accounts and mixing them around is a common way to launder them, as it becomes harder to track the funds. There are even exchanges that offer to do it for you.

  • Is Cotton really dead? (Score:5, Informative)

    by mykepredko ( 40154 ) on Wednesday March 06, 2019 @10:49PM (#58229362) Homepage

    When I RFTA, I see that Cotton died in India - how was this verified?

    If I were an investor, I would want DNA proof that he was dead otherwise, I would think Interpol should be notified to start looking for him.

    $137M disappears eight months before the only person with the password dies?

    It could be criminally inept business practices or just simply criminal. I would look at the latter scenario.

    • Re:Is Cotton really dead? (Score:5, Informative)

      by bill_mcgonigle ( 4333 ) * on Wednesday March 06, 2019 @10:53PM (#58229370) Homepage Journal

      When I RFTA, I see that Cotton died in India - how was this verified?

      Apparently they have the kind of death certificate that can be 'purchased' for $75.

      • oh, just like advanced degrees and doctors diplomas over there

        • Re: (Score:2)

          by AmiMoJo ( 196126 )

          Just like advanced degrees and doctors diplomas in the US, only cheaper. You don't still get spam from fake US schools offering them?

          • Those papers won't be taken seriously by anyone with a brain... just like 66% of Indian "professionals" copy pasting crap from white papers.

      • When I RFTA, I see that Cotton died in India - how was this verified?

        Apparently they have the kind of death certificate that can be 'purchased' for $75.

        !! Do you think he can afford to fake his own death? If he did, he could go to jail for it if caught. Not worth the risk.

      • There is a reason behind these certificates. For the reincarnated these are the affordable official documents for one's demise. When they are born again, but as a cockroach, at least they won't be crawling around saying That's $75 I'm never getting back

    • Re:Is Cotton really dead? (Score:5, Interesting)

      by quantaman ( 517394 ) on Wednesday March 06, 2019 @11:11PM (#58229412)

      When I RFTA, I see that Cotton died in India - how was this verified?

      If I were an investor, I would want DNA proof that he was dead otherwise, I would think Interpol should be notified to start looking for him.

      $137M disappears eight months before the only person with the password dies?

      It could be criminally inept business practices or just simply criminal. I would look at the latter scenario.

      Yeah, the actual subject of the confirmation of his death is weirdly absent from the reporting.

      If he actually died they would have shipped the body back to Canada and had a funeral. Even if it were a family-only affair that would be pretty damn easy for a reporter to confirm and put an end to all the speculation.

      The only article I've seen is this [thechronicleherald.ca] which states:

      Despite a death certificate from Indian authorities and a statement of death from a Nova Scotia funeral home, an Indian police document giving permission to Robertson to transport Cotten’s body back to Canada, and confirmation from the hospital in which Cotten died about the circumstances surrounding his death, many of Quadriga’s users refuse to believe he is actually dead.

      So if they had permission to transport the body back to Canada then where's the funeral or at least the Canadian funeral home who cremated it?

      I'm not one for conspiracy theories... but I'm inclined to believe he's still alive.

      • Re:Is Cotton really dead? (Score:5, Funny)

        by lazarus ( 2879 ) on Wednesday March 06, 2019 @11:41PM (#58229478) Journal

        I heard from a reliable source that Cotten is actually Cowboy Neil and that he and Malda have been seen drunk with prostitutes in Macau.

      • I'm not one for conspiracy theories... but I'm inclined to believe he's still alive.

        Ditto that. All of the evidence of his death are things that could easily be staged with 8 months and $137 million to work with. If this had all occurred in Canada I would be suspicious. The fact that most of it occurred in India certainly makes it look more suspicious.

      • Re: (Score:2)

        by gweihir ( 88907 )

        Yeah, the actual subject of the confirmation of his death is weirdly absent from the reporting.

        Probably because there is enough legal proof that anybody claiming differently would have to have proof to the contrary or open themselves up to a libel lawsuit. Obvious though as it is that something fishy is going on, a death certificate is legal proof and you cannot just ignore it.

      • Re: (Score:2)

        by AmiMoJo ( 196126 )

        Am I missing something?

        So if they had permission to transport the body back to Canada then where's the funeral or at least the Canadian funeral home who cremated it?

        Despite a death certificate from Indian authorities and a statement of death from a Nova Scotia funeral home

        Are you saying there should also be a certificate of cremation or burial that is publicly available in Canada? I don't know how the system works there.

        • Am I missing something?

          So if they had permission to transport the body back to Canada then where's the funeral or at least the Canadian funeral home who cremated it?

          Despite a death certificate from Indian authorities and a statement of death from a Nova Scotia funeral home

          Are you saying there should also be a certificate of cremation or burial that is publicly available in Canada? I don't know how the system works there.

          For $137 million you don't need a certificate to properly investigate. A reporter can just go down and talk to someone at the funeral home to see if there was a body, and I'm sure there's investors with the cash and motive to hire a PI or Law Firm that can do the same.

          Did the funeral home get handed an urn, an Indian Death Certificate, hold a private service, and based their statement on that. Or did they actually see and prepare the body?

      • Re: Is Cotton really dead? (Score:4, Funny)

        by Nidi62 ( 1525137 ) on Thursday March 07, 2019 @06:51AM (#58230274)
        Bold move Cotton, let's see if it pays off

    • Re: (Score:3)

      by gweihir ( 88907 )

      How would a "DNA proof" that he was dead even look like? If he was cremated (which is perfectly legal), then there would be no DNA. Basically the death certificate is what you get and it is legal proof, that is just how things are set up.

      Also, it is quite possible the money is gone. Stealing $137M is pretty gutsy. However doing speculation with it and losing it all is a lot less so and has been done before. The current obvious cover story could then just be a desperate attempt to hide what has happened, not

      • How would a "DNA proof" that he was dead even look like?

        When you look at the DNA under a very powerful microscope you can see that the little DNAs have Xs over their eyes.

    • When I RFTA, I see that Cotton died in India - how was this verified?

      What makes you think that "Gerald Cotton" was his/her/their true identity?

    • Probably he paid some bum with a similar body type to break into his house and kill him so his family could collect the insurance money, but then killed the bum instead and faked a car crash to burn up the body. Luckily the bum did not turn out to be an undercover investigative reporter.

  • Making Bank Robbery Easier! (Score:5, Insightful)

    by kenwd0elq ( 985465 ) <kenwd0elq@engineer.com> on Wednesday March 06, 2019 @11:05PM (#58229402)

    It seems that the primary function of cryto-currencies is to make bank robberies easier to do and more difficult to trace.

    • FDIC is a good thing

      • I'm generally a Libertarian, but the FDIC is generally an example of "GOOD Government Action".

        • Newsflash: we're all generally libertarians. Most people would like to do whatever they want. A dictator is just a libertarian who believes their liberty is deserved regardless of the expense to others, which is unsurprisingly also what most libertarians I've encountered online also want.

    • The value of a currency is the effort you are willing to put into stealing it.

  • Yeah, I wouldn't believe this guy is dead unless I saw the body, took a tissue sample myself and verified the DNA. A body alone wouldn't be enough, and a smudge of DNA sans body wouldn't be enough either.

    One possibility is that he stole it, spent/gambled/lost it, committed suicide and then tried to make his death look like a non-suicide for societal or insurance reasons. The other possibility is that he's alive and well living off 100+ million bucks somewhere. Maybe he was trying to do this but got kil

    • And how were you planning to verify the DNA [schlockmercenary.com]?

    • Re: (Score:2)

      by gweihir ( 88907 )

      The body was cremated. Perfectly legal to do, no DNA test possible. And there is a valid death certificate. It may be faked, but you would have to prove that, not the other way round.

  • "QuadrigaCX's Crypto Accounts Were Emptied Months Before CEO's Mysterious Death, Putting Fate of $137 Million In Doubt"

    I have no doubt as to what happened to it.

  • the company was $190 million in debt, and the bulk of the accounts totaling $137 million is now missing.

    what was Gerald Cotten business model, I want in, he ain’t dead, he is living it up on a Caribbean island looking over his shoulder every five seconds.

  • While holding the password to the wallet ?

    Sounds like time to take out the handcuffs and start looking at murder charges real closely.

  • Cold storage does not imply balances are hidden (Score:5, Insightful)

    by phitar ( 457288 ) on Thursday March 07, 2019 @01:13AM (#58229608) Homepage

    Can someone explain how the 8 months old "withdrawal" is only seen now and required hacking the computer.
    Isn't the point of the blockchain you can trace (except through mixers or specific ZKP systems) transactions precisely because every node holds an exact and full copy of the ledger of transactions?
    The only thing hacking the computer could provide is private keys to actually transfer value out of those wallets but the balance should have been public.

    • Re:Cold storage does not imply balances are hidden (Score:5, Informative)

      by Cyberax ( 705495 ) on Thursday March 07, 2019 @01:46AM (#58229642)
      The whole blockchain is massive (around 200GB now) and you can obfuscate transfers a lot. Especially if you do bitcoin/ethereum conversions. The theft will not be immediately apparent.

    • Re: (Score:2)

      by AmiMoJo ( 196126 )

      Maybe they mean he moved the wallet file off the computer 8 months ago. You can transfer ownership of cryptocurrency offline by giving someone else the wallet file, and obviously the public ledger has no record of it.

      The timeframe could be determined by email timestamps, file access timestamps, logs, all sorts of things.

      • You can transfer ownership of cryptocurrency offline by giving someone else the wallet file

        Okay, I don't understand this. What if I gave someone a copy of the wallet file? We both have identical wallet files. How does the system figure out who really has the money?

        • Re: (Score:2)

          by AmiMoJo ( 196126 )

          Whoever spends it first wins, basically. The wallet just contains crypto keys that relate to an amount in the shared ledger of accounts, anyone with the key can transfer that money.

    • My guess would be that the addresses for the wallets being used for cold storage were not public. So until they cracked the laptop, they didn't know which addresses to check. So if they cracked the laptop, found the wallets and then they could check the history of those addresses and see that the equivalent of $137M used to be stored in those addresses and no longer is.

      • Re: (Score:2)

        by jythie ( 914043 )
        Hrm. But couldn't they figure out the address of the cold storage wallets by looking at the transfers going to them from customers? The BTC going in would be recorded, so it should be possible to see it going out too. Though maybe this is exactly what the 'audit' was doing?
  • It sounds like this man was planning to fake his own death & disappear. Are they sure, I mean REALLY REALLY sure, that he's dead & not living it up in the Bahamas?
  • I believe in currencies, say someone stole a bag of say $100 bills and if the bank/govt knows the sequence numbers, it can theoretically invalidate those numbers. I think a crypto-currency will have some form of identifier/sequence-number that you could mark it as dead and remove it from circulation. Not an expert on how crypto currency works but if it doesn't have this capability, I guess it's a serious design flaw. As anyone can steal and run-away and the majority can't do anything but just look.
    • The government can invalidate bills? I don't see how that would work. Is there a master list of good bills -vs- bad bills? Does every merchant have a copy of this list they run the bills over? Me thinks not.

      • They can and they do, at least in any nation that has serial numbers attached to their paper currency. Those fancy machines don't just count the bills and denominations, but check serial numbers and anti-forgery markers. It's exactly how they are able to put their own "marked" currency into circulation, most often with a specific person or group of persons as the target to receive that currency (think: suspected drug dealers, fraudsters, etc).

    • At best, governments can publish a list of serial numbers for banks to monitor should the bills come into the bank’s possession and then remove them from circulation. However I am not aware of any system that flags these bills for the general public.

      In this case, someone can possibly audit the ledger for these coins, but they were transferred almost a year ago. If they were converted to cash, then the money is gone. If they were transferred to legitimate buyers multiple times, how do you recover it?

    • Re: (Score:2)

      by sjames ( 1099 )

      The "coin" part of Bitcoin is just an analogy. It's just balances moving around, there are no serialized tokens of any kind.

  • Go into building rockets or invest in a Trump casino.

  • Have we seen his body, and has whatever we've seen been proved to be him?

    • No. That’s one of the things that is fueling the conspiracies. He died in India in December and it was reported later by his wife. Normally this wouldn’t be a major issue as people should have privacy about their lives; however, the huge amount of “locked” money now appears to be missing. If the money wasn’t locked and was available right away or the money was there when unlocked, no one would question the death.

  • A Nova Scotia court threw the company a lifeline this week, granting it a 45-day extension that prevents creditors from filing lawsuits against it until mid-April.

    This prose is pure, unadulterated, snotty-nosed imbecility.

    Imagine the botched Apollo 13 stir had happened instead on Apollo 8.

    Apollo 8 [nasa.gov]

    A Lunar Module was not used on the Apollo 8 mission but a Lunar Module Test Article which was equivalent in mass (9027 kg) to a Lunar Module was mounted in the spacecraft/launch vehicle adapter as ballast for mass

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