Report: QuadrigaCX Wallets Have Been Empty, Unused Since April
Ernst & Young has released its third report in QuadrigaCX’s creditor defense procedures, revealing that its cold wallets have actually long been empty.
Big Four audit firm Ernst & Young (EY) released its “Third Report of the Monitor” in the creditor protection procedures of Canadian crypto exchange QuadrigaCX on March 1. Within the report, the audit company has actually determined 6 different crypto wallets that were used primarily to store Bitcoin (BTC), the cryptocurrency most used on the platform. Apart from one inadvertent transaction of Bitcoin amounting to almost $500,000, there have actually been no deposits in the wallets since April 2018. Additionally, the report states:
“To date, the Applicants have been unable to identify a reason why Quadriga may have stopped using the Identified Bitcoin Cold Wallets for deposits in April 2018, however, the Monitor and Management will continue to review the Quadriga database to obtain further information.”
In early February, the exchange filed for creditor protection when– after the death of its founder Gerald Cotten– it lost access to the cold wallets and corresponding keys, that ostensibly held the assets owed to different clients. Ever since, the exchange, the court, EY, and investigators have actually been navigating a convoluted procedure to ascertain where the funds went.
Today’s report also specifies that, within the course of its examination, EY has actually discovered 14 user accounts that “may have been created outside the normal process by Quadriga” and that “[i]t appears that the Identified Accounts were created under various aliases.” The report continues:
“…the Identified Accounts were internally created without a corresponding customer and used to trade on the Quadriga platform. [EY] was further advised that deposits into certain of the Identified Accounts may have been artificially created and subsequently used for trading on the Quadriga platform.”
The monitor has also been trying to secure transaction and account balance data from the platform, which is stored on the cloud by Amazon Web Services, however:
“Due to the account being a personal account in the name of Mr. Cotten, AWS has indicated that it is unable to provide the Monitor with access to the AWS Account to permit a copy of the data that it is hosting to be secured.”
Previously today, cryptocurrency exchange Kraken provided a $100,000 reward for information that could lead to the discovery of QuadrigaCX’s missing funds. The reward can be collected in either fiat or digital currency. Kraken mentioned, “All leads gathered by Kraken will be supplied to the FBI [Federal Bureau of Investigaion], RCMP [Royal Canadian Mounted Police] or other law enforcement authorities, who have an active interest in this case.”
Message from QuadrigaCX ToCustomers
February 5, 2019
Today an order for creditor protection in accordance with the Companies’ Creditors Arrangement Act (CCAA) was issued to allow us the opportunity to resolve outstanding financial issues that have affected our ability to serve our customers.
We did not enter into this decision lightly. For the past weeks, we have worked extensively to address our liquidity issues, which include locating our very significant cryptocurrency reserves held in cold wallets required to satisfy customer cryptocurrency balances on deposit and sourcing a financial institution to accept the bank drafts being transferred to us. Unfortunately, these efforts have not been successful. Since we were unable to resolve these issues in a timely fashion, we did not want trading to continue on our platform. We filed for creditor protection to help resolve these matters and preserve the interests of our customers.
With this filing, the Court has appointed a monitor, Ernst & Young Inc., an independent third party to oversee these proceedings as we make every effort to address our customer obligations. Filing for creditor protection allows us to work diligently through the process, and to try ensure the viability of our company.
We are sure you have many questions. We are in the early stages of a long process and we do not have all the answers right now. What we can tell you is that the CCAA process will allow QuadrigaCX to keep all options open to attempt to maximize the funds available for the company’s stakeholders. We will provide further updates to the extent possible.