Crypto in 2019 apparently means asking questions that we never expected to ask. Such as, how is it possible for funds to disappear from a cold wallet, controlled by a dead man who allegedly left no copy of the private keys? According to a report by Ernst & Young (EY) who have been appointed as Quadriga monitors by the Canadian courts, this puzzle is one of many.
The 30-year-old-founder, Gerald Cotten, died due to complications from Crohn’s Disease in December, taking the only passwords to the cold wallets with him to the grave. EY auditors were engaged to try and recover the $190 million in funds. They were able to access Gerald Cotten’s master account only to determine that all of the crypto wallets had been emptied eight months before his death.
“In April 2018, the remaining bitcoin in the Identified Bitcoin Cold Wallets was transferred out bringing the balances down to nil,” the report said.
EY also found 14 client accounts that were “created outside the normal process” and were involved in the withdrawal of the funds, sending them to “addresses not associated with Quadriga.” Those accounts were “internally created without a corresponding customer and used to trade on the Quadriga platform,” said EY. A representative of Quadriga said that deposits into some of those accounts “may have been artificially created and subsequently used for trading on the Quadriga platform”.
Auditors Examining All Historical Transactions For Clues
The mystery deepens as Canada’s Globe and Mail reported last week. Quadriga co-founder, Michael Patryn, is not quite who he says he is. Patryn’s real name is Omar Dhanani, who spent time in a US prison after he was arrested in California as part of an identity theft, credit card fraud and money-laundering ring in 2004. Dhanani was deported to Canada.
EY also discovered that Quadriga kept “limited books and records” and never reported its financials. The auditors are now examining all historical transactions for further clues.
Cotten’s widow, Jennifer Robertson, has come under fire for seeking reimbursement of $225 000 in court fees. Gavin MacDonald, a partner at Cox & Palmer, the law firm representing the creditors of Quadriga, said that the repayment of Robertson is “inappropriate at this current juncture”.
A Reddit site that’s dedicated to the scandal has thousands of subscribers where updates are posted regularly.