QuadrigaCX, the largest Bitcoin exchange in Canada, lost no less than $ 190 million. The owner died, and he was the only one with access to the money. Is the money simply lost, or does the story get a tail?
QuadrigaCX ownder died
January is bursting with messages about lost money at exchanges. Cryptopia, for example, where millions of dollars were stolen by a hacker. And even more recently stolen money at LocalBitcoins, and millions of stolen IOTA, which fortunately have largely been recovered.
This time it is a huge amount: $ 190 million. It has not been stolen, but the Canadian exchange QuadrigaCX has lost it. In other words, it is somewhere under lock and key, in so-called cold storage, and there is no one who has the key. The person with access has died, and that was a scenario that no one thought about at the exchange.
Jennifer Robertson, the widow, states in a statement (PDF) that the exchange owes 115,000 customers about $ 190 million, of which $ 147 million is cryptocurrency. It is unclear which part of the $ 147 million in cold wallets is fixed. In the statement Robertson states that “a small part of the coins” is stored in a wallet that is accessible, the hot wallet. More specifically than that it was not, and therefore it is assumed that a large part of the millions mentioned is lost.
Single point of failure
A single point of failure (SPOF) is a part of the system that, if it stops, will cause the entire system to come to a standstill. You can imagine that SPOFs are undesirable in systems where high availability and reliability is desirable. Financial systems are examples of this.
In this case there was a clear SPOF: the owner of the exchange. Robertson: “The normal procedure was that Gerald Cotten [the owner] moved the bulk of the coins to cold storage, a way to protect the coins from hacking or theft, and Cotten was the only one that moved fiat and cryptocurrency. ”
QuadrigaCX needs extra time
QuadrigaCX has requested creditor protection. That is temporary protection against creditors to win time. According to the exchange, that time is needed to decrypt the laptop.
That task now lies with Robertson. She hired experts to crack Cotten’s accounts and devices, with the aim of gaining access to the money, which is believed to be stored on Cotten’s (encrypted) laptop. He has already succeeded in his personal and professional e-mail, but that is insufficient to get to the funds.
QuadrigaCX website is unreachable
Since the liquidity problems arose, the stock exchange still accepted automatic and manual deposits. Meanwhile, however, the stock market is stopped. In the background, the exchange also appears to be involved in a legal battle with payment processors. There is another € 46 million of the fair parked there.
Whether QuadrigaCX will be online again in this form is still the question. Robertson does not exclude that it is better to sell the stock market. Reportedly, the first bids on the stock market have already been made.
Is it a fake death?
Meanwhile there are also rumors about a preconceived plan by Cotten, in which the enormous sum of money serves as a motive. The question is asked whether Cotten really is dead, and refers to the ease with which death records can be copied.
This theory is reinforced by an analysis of cold wallets used by the exchange, and the observation that some of these cold wallets are still being used. Some of the money in it has moved somewhere else.
It starts to look like a film script in this way, and it is unclear how accurate the aforementioned analysis is. That said, it would not be the first time that malicious practices would emerge due to the efforts of a large group of people and the transparency that a blockchain offers.
At this moment, however, the hope is based on Robertson and the people who turn them on to gain access to the money saved. We keep an eye on how this story develops further.