On February 12, Ernst and Young (EY), the monitor of the QuadrigaCX case, released its first report with the Supreme Court of Nova Scotia. In it, EY stated that the exchange “inadvertently” moved $370,800 in Bitcoin to a cold wallet controlled by CEO Gerald Cotten, who passed away.
The report of the monitor read:
“On February 6, 2019, Quadriga inadvertently transferred 103 bitcoins valued at approximately CAD $468,675 to Quadriga cold wallets which the Company is currently unable to access.”
“The Monitor is working with Management to retrieve this cryptocurrency from the various cold wallets, if possible.”
Throughout the past several weeks, CCN.com extensively reported about QuadrigaCX and the story involving the CEO of the company who reportedly died with the passwords to the exchange’s cryptocurrency cold wallets containing user funds.
What Does This All Mean to the Bitcoin Holdings of Users?
If the CEO passed away and the access to the company’s cold wallets or offline wallets cannot be restored, the $370,800 in Bitcoin “inadvertently” sent to the cold wallet cannot be recovered.
As such, for now, the company and the creditors of QuadrigaCX only have access to the company’s hot wallets. But, EY disclosed that the hot wallets of QuadrigaCX have less than $1 million in them, which is nowhere enough to pay back users who the company owes well over $150 million to.
“The Monitor was advised that Quadriga held the following cryptocurrency balances (with approximate Canadian currency equivalent aggregating to $902,743) within its hot wallets on its servers as at the Filing Date,” EY said.
Whether it is a hot wallet or a cold wallet, major cryptocurrency exchanges typically go through additional measures to ensure that funds are sent to the right address.
Sending $370,800 in Bitcoin from a hot wallet to a cold wallet the company knows cannot be accessed is equivalent to a company sending hundreds of thousands of dollars to a wrong bank account that the company does not control, which just does not occur.
Already, as reported by The Wall Street Journal, suspicions on the legitimacy of the explanation provided by QuadrigaCX on the loss of $190 million in funds intensified as independent researchers could not find sufficient evidence to prove the existence of cold wallets owned by the exchange.
In its report, EY said that it is attempting to access any cold wallets that exist, which suggests that wallets that can be considered as cold wallets have not been found yet.
The monitor said:
The Applicants and the Monitor will continue with their efforts to access Mr. Cotten’s devices, find and access any Quadriga cold wallets that exist, and locate any other cryptocurrency belonging to Quadriga and report back to the Court in respect of these activities.
The Unbelievable Story of Bitcoin Exchange QuadrigaCX
When the case of QuadrigaCX was first publicized, Kraken CEO Jesse Powell said on February 2 that the story of the exchange is “bizarre and, frankly unbelievable.”
Even at the time, due to the movement of some cryptocurrency wallets linked to the exchange, analysts were skeptical towards the nature of the lost wallets and whether the statement of the exchange could be backed with sufficient evidence.
The EY report comes in a period in which analysts and industry experts are not certain whether the cryptocurrency cold wallets held by the CEO of the exchange exist.
The monitor has confirmed that $370,800 in Bitcoin was sent to a cold wallet, and that may mean that the monitor has found at least one of the cold wallets the exchange allegedly does not have access to.
In the upcoming weeks, EY is expected to continue the search for the company’s missing crypto wallets by going through the devices owned by CEO Gerald Cotten.
Read the full EY report below:
EY QuadrigaCX Report by on Scribd
Featured Image from Shutterstock
Last modified: March 4, 2021 2:53 PM