The QuadrigaCX debacle continues, with new revelations

Last week, BetaKit reported on the embattled crypto exchange firm, QuadrigaCX. The firm currently owes its clients $250 million, most of which is stored on the now-deceased CEO’s encrypted laptop.

The company filed an application with the Supreme Court of Nova Scotia for creditor protection, and last week was granted a 30 day stay in an effort to stop any lawsuits being filed against the company in the meantime. Here’s what we’ve learned since then:

Death of CEO confirmed

A private hospital in Jaipur, India publicized details about the death of Quadriga CEO, Gerald Cotten. In a statement shared with CoinDesk last Thursday, the hospital, Fortis Escorts, stated Cotten was admitted to the hospital on December 8 and died of cardiac arrest on December 9.

According to the hospital’s statement, Cotten was admitted to the hospital in a “critical condition” with “pre-existing Crohn’s disease and was on monoclonal antibody therapy every eighth week.” Upon admission, Cotten was diagnosed with septic shock and other unspecified complications relating to his condition.

CoinDesk also reported that a statement of death, distributed from J.A. Snow Funeral Home, as well as a death certificate issued by the Government of Rajasthan’s Directorate of Economics and Statistics, confirm that Cotten died on December 9 in Jaipur.

“On 9th December, 2018, the patient suffered a cardiac arrest but was revived by CPR,” the hospital’s statement read. “The patient[‘s] heart condition continued to deteriorate and the patient suffered a second cardiac arrest at 6:30 p.m. [13:00 UTC].”

Below is a copy of the death certificate obtained by CoinDesk. Parts of the document have been redacted.

Funds were moving right before Quadriga’s collapse

According to CoinDesk’s review of public blockchain, almost $1 million worth of ether (ETH) left Quadriga and went to other cryptocurrency exchanges in December, the same month its CEO died.

In a string of transactions sent from Quadriga’s hot wallet, over 9,000 ETH moved from the exchange firm to accounts at Binance, Bitfinex, Kraken, and Poloniex. Five thousand ETH was moved between December 2 to December 8, the day before the Cotton’s death. Most of the ether sent that week (4,550) ended up at Binance, according to CoinDesk.

It is uncertain whether it was Quadriga itself or its customers that commenced these transactions, but the flows of funds have fallen under suspicion in the crypto space, CoinDesk reports.

Is the money trapped, or missing?

According to an article from the Wall Street Journal, another independent researcher is suggesting Quadriga’s money might be gone, not trapped.

As BetaKit reported last week, James Edwards, also known as Crypto Medication, an analyst behind crypto blog Zerononcense, said he reviewed the exchange’s claims based on an examination of publicly available transaction histories and determined that QuadrigaCX never lost access to its Bitcoin holdings, rather the missing sum was inaccurate. More recently, another analytics firm, Elementus Group, traced the exchange’s ether holdings, and came to the same conclusion, according to the Wall Street Journal.

“It is extremely likely that there aren’t any cold wallets,” CEO Max Galka told the Journal. Most of the funds appeared to be going out to other exchanges, he said, including Bitfinex, Poloniex, and ShapeShift; not being stored in cold wallets, which hold cryptocurrency when its not being actively traded on an exchange.

Coinsquare weighs in

The CEO of Coinsquare spoke to BNN Bloomberg stating that the Quadriga debacle could have a chilling effect on the overall market, adding that he expects users will only be able to recover some of their money.

“At end of the day, you have 100,000 people that now have their money locked away with Quadriga, without knowing what’s going to happen,” Coinsquare CEO, Cole Diamond told BNN Bloomberg’s Jon Erlichman and Amber Kanwar Thursday.

Diamond said the sector needs to address a number of issues before it can grow further. He added that his exchange firm has offered its blockchain team’s expertise to help with the recovery process at Quadriga.

It should be noted that last week, BetaKit first reported Coinsquare’s layoff of approximately 40 employees in roles spanning across the company, including its CFO and COO. Coinsquare’s headcount sat somewhere near 150 employees at the time, pointing to an approximate 27 percent reduction in its staff.

Diamond acknowledged to BetaKit at the time that cryptocurrency exchanges have been in trouble of late, but denied that Coinsquare has anything to worry about. “We know that other exchanges in this country are in trouble. Coinsquare is in absolutely no trouble,” he stated.

Coinsquare also released a statement on February 6, to address some of its practices in light of Quadriga’s troubles. Coinsquare affirmed that it stores over 97.5 percent of its digital assets in cold storage dispersed across multiple locations. The statement said access to cold storage and Coinsquare’s servers is strictly controlled with strong encryption and hardware key devices following the industry’s best practices.

“Simply put, the issues faced by QuadrigaCX are not issues at Coinsquare,” the company claimed.

New revelations about Quadriga’s co-founder

A company profile from The Globe and Mail revealed new details about Quadriga’s turmoil with legal battles and its troubled history, including its lesser-known co-founder, Michael Patryn. 

Last year, Patryn hired Toronto-based to “remove negative content referencing him on a particular website,” according to a lawsuit he filed against the firm in Toronto small claims court. offers services to bury uncomplimentary search results while creating and promoting positive material. pointed to posts about Patryn on Reddit from users claiming that Patryn, co-founder of Quadriga, is actually a “fraudster” named Omar Dhanani.

The Globe discovered there is an Omar Dhanani, who reportedly spent 18 months in a federal prison in the US for his role in an online identity theft ring known as the Shadowcrew, according to US court records.

Dhanani, who also used the name Omar Patryn, took a deal and pleaded guilty in 2005 to one count of conspiracy to transfer identification documents. Dhanani, who was born in 1983, was released in 2007. By 2009, according to a court document, he had been deported to Canada. In an email to The Globe, Patryn claimed not to be Dhanani.

Image Courtesy Pixabay

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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