Gerald Cotten, CEO of the Canadian cryptocurrency exchange QuadrigaCX, died suddenly in India last December, leaving some 76,000 customers with no way to access their investments, now estimated at more than $200 million in cash and cryptocurrency.
That’s how the saga of the missing QuadrigaCX fortune begins. But a court-appointed monitor has found that Cotten was trading Quadriga customers’ money on rival exchanges and cashing out multi-million-dollar sums before his death. Meanwhile, a strong contingent of his angry investors remain unconvinced that he is truly dead.
Quadriga is currently mired in bankruptcy court while Ernst & Young, the court-appointed monitor, digs through its shoddy financial records in search of the missing money.
WATCH: Clients take cryptocurrency firm to court
Auditors have uncovered evidence that Cotten was using Quadriga customers’ funds to trade on other exchanges and send money to his own accounts over time. They also point out that he and his wife received significant monetary transfers from Quadriga, and enjoyed a lavish lifestyle of travel on board their own personal jet.
Here’s what you need to know about the scandal that’s playing out in a Halifax courtroom and being dissected on Reddit threads full of Quadriga’s ex-customers.
March 18, 2016
Cotten assumes full control of QuadrigaCX after several executives resign in the wake of a British Columbia Securities Commission order. The BCSC had ordered Quadriga to cease trading because it failed to submit a financial audit.
All of Quadriga’s finances now run through Cotten, who holds the only passwords to the encrypted accounts holding the money and keeps almost no records of the platform’s transactions, according to court records.
Summer 2017
Quadriga capitalizes on the Bitcoin boom, conducting more than $1.2 billion in trades. The company also loses more than $14 million in Etherium coins due to what it calls a “software glitch.” Customers complain about delays in accessing their funds.
Ernst & Young later reveals that Cotten set up several accounts under aliases and started trading customers’ money with other exchanges, incurring tens of millions of dollars in transaction fees. Many of the transactions flow through an account under the name Chris Markay, according to court documents.
Cotten also starts cashing out a massive trove of Bitcoins from a private off-shore account in his name. He eventually withdraws the equivalent of $80 million over three years from this account.
Jan. 8, 2018
CIBC freezes $26 million in accounts used by Quadriga to process some of its payments. The accounts remain frozen for several months while the bank tries to sort out ownership of the money.
June 8, 2018
Cotten marries Jennifer Robertson, according to a marriage certificate obtained by the Globe and Mail. The couple take several trips together on Cotten’s private jet.
The court-appointed monitor later points out that “neither Mr. Cotten nor his wife had any material source of income other than funds received from Quadriga.”
Nov. 27, 2018
Cotten files a will leaving all of his assets to Robertson. He also names her the sole benefactor and executor of his estate.
His estimated $12 million in assets includes several homes, luxury cars, a yacht and a private jet.
Cotten instructs Robertson to give many of his assets to her family. He also instructs her to set up a $100,000 trust for his two pet chihuahuas.
Dec. 9, 2018
Cotten dies of complications from Crohn’s disease in Jaipur, India, at the age of 30, according to Robertson. She says they were in India to open an orphanage.
Quadriga continues to accept deposits from customers, according to an affidavit later filed by Robertson.
Dec. 13, 2018
Jan. 14, 2019
Quadriga informs customers that Cotten has died.
Jan. 28
QuadrigaCX halts its operations for “maintenance.”
Jan. 31
QuadrigaCX files for creditor protection.
Robertson says in an affidavit that she cannot access the company’s assets because Cotten stored them in a password-protected “cold wallet” on his laptop. She says she does not know the password.
Robertson says Quadriga only has access to approximately $30 million in assets, but there should be “in excess of $180 million in coins in cold storage.”
Feb. 5
QuadrigaCX Fintech Solutions Corp. and its related companies are granted creditor protection. It quickly becomes clear the company has no real assets, and that the process of recovering the missing money will be difficult.
The court appoints the accounting firm Ernst & Young to recover as much of the missing money as possible.
Quadriga owes approximately 76,000 users a total of $74.1 million in cash and $140.5 million in cryptocurrency, for a total value of $214.6 million, according to numbers later reported by Ernst & Young in June.
Feb. 6
Quadriga transfers Bitcoins into a cold wallet that the company is unable to access. Ernst & Young later says the transfer was due to an error in the platform’s automatic settings.
April 8
QuadrigaCX enters bankruptcy proceedings after efforts to restructure the company fail.
Ernst & Young gains greater powers to investigate the company’s finances. The firm has already found several cold wallets, but they’ve all been empty. Several other accounts appear to have been created by Cotten using pseudonyms.
May 13
Ernst & Young recovers $28 million in cash assets from Quadriga. However, the majority of the missing assets remain locked up as cryptocurrency.
June 19
Ernst & Young reveals Cotten made several significant cryptocurrency transfers from Quadriga into competitor exchanges and his own personal accounts. The accounting firm noted more than 67,000 individual transactions.
“It appears that user cryptocurrency was traded on these exchanges and in some circumstances used as a security for a margin trading account established by Cotten,” the report says. Quadriga lost tens of millions of dollars in fees due to trades with other exchanges.
Ernst & Young also reports that Quadriga made “significant transfers” of cash and cryptocurrency to Cotten and Robertson.
The monitor says it’s now recovered a total of $31.5 million in assets, while the bankruptcy trustee has recovered another $500,000 and is pursuing another $900,000.
Cotten’s $12 million in assets are being preserved.