(Rejected) QuadrigaCX CEO Takes the Blame for The Collapsed Canadian-Based Crypto Exchange, OSC Investigations Reveals

The Ontario Securities Commission (OSC) published a report that detailed the findings of its 10-month investigations into the collapse of QuadrigaCX, once the largest cryptocurrency exchange in Canada. The provincial Canadian regulator made a conclusive finding that the downfall of the crypto exchange was the results of fraud committed by its CEO and co-founder Gerald Cotten. The exchange left 76,000 customers out of pocket for almost $200 million.

The Crypto Exchange Was A Pyramid Scheme

Most people believed that clients lost millions when Cotten died as he was the only person with the passwords to the encrypted wallets of the exchange. But the OSC newly published report shows that such speculations are false. The watchdog revealed that the assets were misappropriated or lost by Cotton before his death. The regulator found out that Cotten committed fraud that resulted in the collapse of the crypto firm and left thousands of clients to take a loss of $169 million.

Gerald Cotten died in India in 2018 December while he went for his honeymoon. The OSC dismissed the allegation that Cotten’s death left the funds in accounts known as “cold storage wallets”, which he only had the passwords to. The agency disclosed that Cotten’s fraudulent trading on the exchange platform caused the bulk of the money lost about $115 million.

The OSC reported that Cotten lost an additional $28 million while trading customers’ assets on three external crypto asset trading platforms without customers’ authorization.

The conclusion of the OSC’s investigative report said that the collapsed crypto exchange was mainly a Ponzi scheme. QuadrigaCX had almost no assets left. Furthermore, the exchange was operating like a revolving door as new clients’ deposits were immediately diverted to fund withdrawals of other clients.

It is rare for the OSC to publish an investigative report, but the agency did so to help clients understand what happened to QuadrigaCX and hopefully to prevent such kinds of fraud from happening again. The watchdog said that Cotten gave false assurance to customers who entrusted their funds to his company.

The agency’s 10-month investigation involved interviewing key witnesses, analyzing blockchain and trading data, and collaborating with several regulatory bodies abroad and in Canada.  

17,000 Customers Claim Refund from Collapsed Exchange QuadrigaCX

Ernst & Young, the trustee of the bankrupt QuadrigaCX exchange, published a report indicating that approximately 17,000 customers have submitted their claim to get the remaining assets of the defunct crypto exchange. QuadrigaCX announced on 14^th January 2019 that Cotten died in India. Ernst & Young assumed control of QuadrigaCX in 2019 February after the crypto exchange filed for bankruptcy. The audit firm took over custody of the crypto exchange’s assets and managed to recover only $46 million in assets to pay customers. However, the trustee is yet to formulate a working plan concerning how it would distribute the funds to clients once clearance is given.