QuadrigaCX Audit Reveals A Discrepancy Of $100 Million In The Exchange’s Cold Wallet

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Towards the end of January, Quadriga announced that it owes its customers almost $200 million in fiat and cryptocurrencies. About $137 million out of the money was in cryptocurrencies while the rest was in fiat. The money became inaccessible after Gerald Cotten, the CEO of the company died without giving anyone the private keys. The money was reportedly in cold wallets. In February, about $400,000 in BTC was sent to the cold wallet by accident. The audit has revealed that this is the only amount in the cold wallet leaving $100 million in cryptocurrencies unaccounted for.

Third Party Report Of QuadrigaCX Shows Discrepancy In Account Records

Ernst and Young (EY) was appointed by the court to monitor QuadrigaCX and perform a third-party audit on the accounts linked to the exchange. The report released by EY didn’t give enough details about the location of the missing funds. The addresses to the cold storage that are supposed to be owned by QuadrigaCX were not released by EY until yesterday.

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Finally, EY released six cold Bitcoin addresses that were being used by QuadrigaCX. Out of the six, five were initially identified as the receiving accounts of 103 Bitcoins during a platform setting error. Yesterday afternoon, the balance in all five wallets was $400,000 in BTC. The sixth address was empty. However, the history showed that $118,000 in BTC was transferred from it in December just before Cotten died. This leaves $100 million in BTC missing. Part of the report states:

“The Monitor has made inquiries of the Applicants as to the reason for the lack of cryptocurrency reserves in the Identified Bitcoin Cold Wallets since April 2018. To date, the Applicants have been unable to identify a reason why Quadriga may have stopped using the Identified Bitcoin Cold Wallets for deposits in April 2018, however, the Monitor and Management will continue to review the Quadriga database to obtain further information.”

EY didn’t mention the existence of any other wallet apart from the six that have been accounted for. It also stated that the cryptocurrencies found were all Bitcoins. No other cryptocurrency was found. This is surprising since up to $16,000 have been deposited in various cryptocurrencies has been deposited in QuadrigaCX’s hot wallet since January 31st. EY is yet to determine who is depositing the funds to QuadrigaCX’s hot wallets.

EY Reaches Out To Exchanges And AWS

Following their audit, EY reached out to 14 exchanges that QuadrigaCX had accounts in but only four have responded. One out of these four have transferred the funds QuadrigaCX held to EY. EY stated that there is a possibility that some of the missing cryptocurrencies may have been sent to exchanges before now. The investigation is still ongoing and no conclusions should be reached yet.

 

EY Also reached out to Amazon Web Services as Cotten set up an account with them. However, AWS said they cannot release any information about the account because Cotten used personal information to open them. EY has requested for a court other to force AWS into giving them access to Cotten’s account. EY is trying to get accounting records of a ledger that will verify the balances that QuadrigaCX controlled but it is proving challenging.

What do you think? Is QuadrigaCX innocent in this case or is it all just part of an elaborate exit scam? Share your thoughts in the comment section.

Max writes about blockchain projects and regulation with a special focus on United States and China. He joined Smarterum after years of writing for various media outlets.

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