QuadrigaCX owes its clients $250 million CAD that the company cannot access


In 2018, Vancouver-based QuadrigaCX was one of Canada’s largest crypto exchanges, now in 2019, the company is beset by a series of troubles.

In the last year, the company’s assets have been frozen, its CEO has died, and it currently owes its customers $250 million, most of which the company’s staff cannot access, according to a recent court filing.

According to CoinDesk, the company claims Quadriga’s remaining staff has lost access to 26,500 BTC, 11,000 Bitcoin Cash, 11,000 Bitcoin SV, 35,000 Bitcoin Gold, 200,000 Litecoin, and 430,000 Ethereum, a total of $250 million CAD. Now – even more troubling – one crypto researcher is calling into question whether or not the company even had access to such funds in the first place.

The exchange platform’s woes began when CIBC froze nearly $26 million of Quadriga’s funds in January 2018. The bank said it was unable to determine who the money belonged to and began an investigation. The bank alleged that money from 465 deposits was held in accounts belonging to the exchange’s payment processor Costodian Inc., and its owner, Jose Reyes, rather than Quadriga. Quadriga claims it is the undisputed owner of the majority of the funds and alleged CIBC was targeting the exchange because of mistrust in virtual currencies.

Early this year, the company also announced its founder Gerald Cotten had passed away on December 9 while working in an orphanage in India. The cause of death was cited by widow Jennifer Robertson as “complications with Crohn’s disease.” Global Affairs Canada confirmed that a Canadian had died in India and it had provided assistance to the family but offered no additional information, citing the protections outlined under the Privacy Act.

QuadrigaCX then announced it had filed an application with the Supreme Court of Nova Scotia for creditor protection, after months of transaction delays cited by the company’s clients. In an affidavit filed January 31, Robertson said Cotten held “sole responsibility for handling the funds and coins,” and the remaining team members have been unable to access the exchange’s cold wallets since his death.

As of January 31, there were approximately 115,000 users with balances signed up on the exchange, with $70 million CAD in fiat, and $180 million in crypto owed overall, according to the filing. Robertson’s affidavit states that assets in those wallets show that Quadriga owes its clients approximately $250 million as of December 17 of last year.

“These are big issues that take big players and time to work through.”

According to CoinDesk, in addition to the roughly $30 million CAD currently being held by payment processor Billerfy, three other third-party processors are holding a combined total of $565,000 CAD. Another payment processor called WB21 is holding an additional $9 million CAD and $2.4 million USD on behalf of Quadriga.

Robertson stated that the exchange’s new directors voted to “temporarily pause” Quadriga’s platform on January 26. Though she did not explicitly state the company’s website went dark as a result, the portal is inaccessible as of February 4. A message from the company’s board of directors on the site’s homepage dated January 31 states, “for the past weeks, we have worked extensively to address our liquidity issues,” noting that efforts thus far have been unsuccessful and it will provide further updates after its hearing with the Nova Scotia Supreme Court.

To help pay users back, the exchange is considering selling off its operating platform, according to CoinDesk. Multiple parties have allegedly approached the exchange to inquire about acquiring the operating platform, though none are named in the filing.

Crypto Medication, a researcher and data analyst who has been responsible for a number of key exposés within the space, used in-depth blockchain analysis and determined that QuadrigaCX never lost access to its Bitcoin holdings, claiming that the bitcoin holdings sum cited in the affidavit is probably inaccurate. Currently, there are no certain figures associated with Crypto Medication’s analysis, but he also claimed Quadriga procured the use of fractional reserves to service its customers, using client deposits to issue withdrawals.

Brian Mosoff, CEO of Ether Capital and cryptocurrency angel investor, called the circumstances “unfortunate” for both the individuals holding funds on the exchange and the cryptocurrency industry as a whole.

Robertson’s affidavit states that assets in those wallets show that Quadriga owes its clients approximately $250 million.

“This incident highlights the need for customers and regulators to develop a deeper understanding of how cryptocurrency exchanges are handling security, custodianship and chain of custody should something go wrong,” he told BetaKit. “Cryptocurrencies have unique security requirements and individuals and institutions should educate themselves and feel comfortable with their chosen exchange and the level of transparency they provide. These are big issues that take big players and time to work through.”

This fallout comes amid more troubling news within the cryptocurrency space. Last week, BetaKit first reported that Toronto-based Coinsquare laid off approximately 40 employees, in roles across the company including its CFO and COO. Coinsquare’s headcount sat somewhere near 150 employees prior to the layoff, pointing to approximately 27 percent reduction in its staff.

Quadriga said in a statement that it hopes the court will schedule a hearing on February 5 to confirm the stay of proceedings. It will appoint Ernst & Young to oversee its operations for the immediate future.


Since this story was published it has come out that Cotten filed a will 12 days before his death, stoking online speculation that he may have faked his death. According to Bloomberg, Cotten signed his last will and testament on November 27, leaving all assets to his wife and making her the executor to his estate. However, CoinDesk said it has obtained an Indian government-issued death certificate, corroborating the story that Cotten passed away in India in early December.

On Tuesday, Nova Scotia Supreme Court Justice Michael Wood granted Quadriga a 30 day stay in an effort to stop any lawsuits being filed against the company in the meantime.

Isabelle Kirkwood

Isabelle Kirkwood

Isabelle is a Vancouver-based writer with 5+ years of experience in communications and journalism and a lifelong passion for telling stories. For over two years, she has reported on all sides of the Canadian startup ecosystem, from landmark venture deals to public policy, telling the stories of the founders putting Canadian tech on the map.

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