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QuadrigaCX founder used clients’ funds for private ends

Jun 21 2019
By
Jonathan Smith

 

The founder and CEO of now defunct QuadrigaCX Gerald Cotton used clients’ funds for private ends, reported the firm’s bankruptcy trustee Ernst & Young Inc. More specifically, Cotton, who died in mysterious circumstances last year, used customers’ funds to trade for his own account on other cryptocurrency exchanges.

 

QuadrigaCX, which was Canada's biggest cryptocurrency exchange, ceased operations this year. The company filed for protection from creditors in January, and was declared bankrupt in mid-April, owing customers $190 million worth of cryptocurrency and fiat.

 

Significant volumes of cryptocurrency were transferred off platform outside Quadriga to competitor exchanges into personal accounts controlled by Mr. Cotten,” Ernst & Young Ernst and Young outlined outlined in the report. “It appears that User Cryptocurrency was traded on these exchanges and in some circumstances used as security for a margin trading account established by Mr. Cotten.”

 

It appears that Cotton’s activity in these competitor exchange accounts resulted in overall trading losses. QuadrigaCX said it's unable to gain access to $145 million of Bitcoin and other crypto assets after its CEO and co-founder died because only he knew where the private keys were.

 

The 30-year old Cotton allegedly died from complications of Crohn's Disease while volunteering for an orphanage in Rajasthan, India. Interestingly, Mr. Cotten's will was signed twelve days before his sudden death. It left his wife the entire C$9.6-million estate including an airplane, a sailboat, a 2017 Lexus, and real estate in Kelowna, British Columbia and Nova Scotia.

 

The report also shows that Cotton used fake accounts since at least 2016 and he misappropriated the funds for luxury travel and real estate investments.

TAGS: QuadrigaCX  bankruptcy  Gerald Cotton  scam  Canada  crypto exchange 
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