$250 Million Inaccessible in QuadrigaCX CEO’s Cold Wallet

Canadian Exchange QuadrigaCX is seeking legal protection after they revealed that $250 million of customers’ funds are in a cold wallet only accessible by their late CEO, a February 1, 2019 report says.

No Way Out

Cryptocurrencies exchanges often go to great lengths to protect the funds in the custody, particularly in light of several attacks and hacks that have plagued various exchanges over the years. In the case of QuadrigaCX, a measure put in place to secure funds seem to have backfired.

According to a February 1, 2019 report, the exchange is in court seeking credit protection. The reason for this is that the exchange is owning as many as 115,000 account holders up to $250 million dollars. The exchange claims the funds are available but only accessible to their CEO. The problem is, their CEO passed away some weeks ago and they have since been unable to access the funds.

The money in question is 26,500 bitcoin worth $120 million, 430,000 ether worth $60 million and millions in other currencies like bitcoin cash SV (BSV), bitcoin gold (BTG), and litecoin (LTC). QuadrigaCX’s problems first began in 2018 when the accounts of 388 customers with the exchange that held about $28 million combined were frozen by the Canadian Imperial Bank of Commerce (CIBC). The reason for the freezing was that the CIBC had doubts as to the ownership of the funds. By December 2018, the according funds were unfrozen by the bank.

Unexpected Events

On December 9, 2018, Gerald Cotten, the CEO of QuadrigaCX, passed away from complications relating to Crohn’s disease in India. “Gerry’s death was a shock to all of us and we are deeply saddened by his passing,” the official statement said.

“One of Gerry’s many accomplishments was his ability to build a highly capable and successful management team, which will continue his legacy.”

Shortly after, transaction limits were imposed on customers’ accounts. The exchange claims that the funds were stored in a cold wallet that was accessible only to Cotten. His unexpected passing now puts them in a complicated situation. According to court documents, the laptop where Cotten operated from is encrypted and the password isn’t known. A majority of the exchange’s funds are on the cold wallet.

“Transfers from the cold wallet to the hot wallet would occur when the hot wallet was running low and withdrawals were being sent to users. The transfer of coins from the cold wallet to the hot wallet was performed manually by Gerry,” said Jennifer Robertson, Cotten’s widow.

If the exchange succeeds in getting credit protection, users will be unable to sue them for access to their funds.