QuadrigaCX’s Cold Wallet Transfers Scrutinized

Leader wllet full with golden Bitcoins.

Canadian cryptocurrency exchange QuadrigaCX allegedly never had the $190 million Bitcoins it reportedly lost access to.

Last month, the crypto community was rocked by the news that Canadian crypto exchange QuadrigaCX had “inadvertently” sent 103 Bitcoins to cold storage wallets.

And, according to blockchain analysis, five addresses were associated with the exchange, and the transactions sent to them were roughly equivalent of the amount that QCX previously allegedly sent by accident to locked cold wallets.

An independent researcher on Reddit found that starting April 2018 each of the five addresses was inactive and most of the Bitcoins they had received were from a wallet only one transfer removed from the hot wallet or straight from the QCX hot wallet.

The Reddit user concluded that with all of this gathered information, it is safe to confirm that the addresses are a part of the cold wallet addresses that belong to QCX.

Gerald Cotten’s Death

When QCX Founder and CEO Gerald Cotten died in December 2018, the exchange became the center of attention.

QCX had been facing banking issues at the time, when customers complained they couldn’t easily withdraw their funds over the course of the past year.

With the announcement of Cotten’s death, fears that the exchange might be a scam were amplified.

Cotten’s wife, Jennifer Robertson, said in a statement that he died on December 9 while traveling in India due to complications stemming from Crohn’s disease.

In an affidavit with the Nova Scotia Supreme Court, Robertson said Cotten had sole control of QCX’s funds and coins, and that the cold storage wallets were inaccessible to the exchange’s team.

When Cotton left no information about the identity of the cold wallets and how to get to them, he also left users out of pocket by $250 million CAD (equivalent of $190 million USD).

Multiple Theories Surrounding the Events

Several claims about the accurate status of QCX’s Bitcoin holdings that contradict the official statements were developed in a comprehensive report by Zerononcense, a crypto research publication.

Zerononcense writes that it seems there are no recognizable cold wallet reserves for QCX.

Bitcoin on top of other golden coins.

Last month, the crypto community was rocked by the news that Canadian crypto exchange QuadrigaCX had “inadvertently” sent 103 Bitcoins to cold storage wallets.

The report says that QCX didn’t lose access to their Bitcoin holdings, and it presents evidence that reportedly shows a party had access to QCX’s wallets after Cotten’s death, more specifically several outgoing transactions that were made after December 9.

More suspicion was raised around QCX allegedly using their customers’ deposits to pay customer obligations.

The report compared QCX’s withdrawal practices to Coinbase, Binance, Bittrex and other cryptocurrency exchanges, and it showed that the movement of Bitcoins is extremely inefficient and uncommon for any legitimate exchange.

In November 2018, QCX faced legal trouble when a judge ruled in favor of the Canadian Imperial Bank of Commerce that froze approximately $19 million in QCX’s accounts because of the inability to find the funds’ owners.

The researchers noted that at least one transaction in which QCX used an accumulation of other users’ funds to complete a withdrawal request also happened in November 2018.

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