Nearly $478,000 in B.C. exchange’s crypto-coins gone, court hears

A report from Ernst & Young says QuadrigaCX is unable to access funds in insolvency case

The court-appointed monitor overseeing the search for the $260 million owed to clients of the faltering QuadrigaCX cryptocurrency exchange says it recently found more than $900,000 in digital assets — only to see more than half of those crypto-coins escape its grasp.

The bizarre turn of events was revealed Tuesday in the first court report submitted by Ernst and Young, which was appointed monitor Feb. 5 when the Nova Scotia Supreme Court granted the insolvent company protection from its creditors.

READ MORE: B.C. cryptocurrency exchange gets court orders amid hunt for $180M in assets

The report says the monitor learned last week that QuadrigaCX was holding $902,743 in Bitcoin, Litecoin and Ether cryptocurrencies in so-called hot wallets — but something went wrong on Feb. 6.

Ernst and Young says QuadrigaCX “inadvertently” transferred 103 Bitcoins valued at $468,675 to so-called cold wallets, which the company is now unable to access.

“The monitor is working with management to retrieve this cryptocurrency from the various cold wallets, if possible,” the report says. ”The monitor has made arrangements to transfer the remaining cryptocurrency into a cold wallet which will be retained by the monitor.”

About 115,000 QuadrigaCX customers are owed about $70 million in cash and $190 million in Bitcoin and other cryptocurrencies.

The Vancouver-based exchange was shut down Jan. 28, more than a month after its CEO and sole director — Nova Scotia resident Gerald Cotten — died while travelling in India, leaving his company without access to much of its cryptocurrency.

His widow, Jennifer Robertson, has said in court documents that Cotten was the only person with access to his laptop, which is thought to contain the digital keys to the cold wallets.

Cold wallets are offline storage devices protected by encryption technology. Cryptocurrency exchanges typically use them to store the bulk of their digital assets, which puts them beyond the reach of online hackers.

Hot wallets are online sites that store smaller amounts of cryptocurrencies, making them readily available for trading — a practice akin to using a currency float in a cash register.

The latest twist in the QuadrigaCX case is sure to feed rampant online speculation about the company’s dealings. Court documents have pointed to persistent rumours about Cotten’s death and threats aimed at his widow, who lived with Cotten just outside of Halifax.

Aside from the cold wallet snafu, Ernst and Young also reported that there is more than one laptop at the centre of the case.

Electronic devices recently retrieved from an encryption expert working for QuadrigaCX include: two active laptops; two older model laptops; two active cellphones; two dead cellphones; and three encrypted USB flash drives.

As well, steps have been taken to retrieve Cotten’s desktop computer from his home office in Fall River, N.S.

Michael MacDonald, The Canadian Press

Like us on Facebook and follow us on Twitter

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Saanich Police respond to petition for new police agency on Lindsay Buziak murder case

Petition asks Public Safety Minister to to help find justice for slain realtor

Grave site at Ross Bay Cemetery vandalized overnight

Graffiti found on grave of Sir James Douglas

North Saanich man fears tougher moorage policies could cost him his home

Stewart Jackson has been living on a boat off Lillian Hoffar Park for about four years

SMUS girls win junior Island title

Blue Jags, Spartans and Bulldogs headed to provincials

Petition calls for suspension of Victoria councillor Ben Isitt

Isitt says petition ‘does not provide a reliable barometer of public opinion’

Greater Victoria Crime Stoppers wanted list for the week of Feb. 18

Greater Victoria Crime Stoppers is seeking the public’s help in locating the… Continue reading

POLL: Do you support the proposed changes for ICBC?

Tuesday’s provincial budget predicted a shift from shortfall to surplus in wake… Continue reading

Health officials confirm sixth COVID-19 case in B.C.

Woman remains in isolation as Fraser Health officials investigate

Study says flu vaccine protected most people during unusual influenza season

Test-negative method was pioneered by the BC Centre for Disease Control in 2004

Saskatchewan and B.C. reach championship round at Scotties

British Columbia’s Corryn Brown locked up the last berth in Pool B

Resident discovers five discarded hog heads in Vancouver Island ditch

WARNING: Graphic image may be upsetting to some readers

Canadian Premier League announces 2020 home dates for eight-team circuit

Pacific FC hosts FC Edmonton on April 11 in Langford

B.C. lawyer, professor look to piloting a mental-health court

In November, Nova Scotia’s mental-health court program marked 10 years of existence

Most Read