Nearly $478,000 in B.C. exchange’s crypto-coins gone, court hears

A report from Ernst & Young says QuadrigaCX is unable to access funds in insolvency case

The court-appointed monitor overseeing the search for the $260 million owed to clients of the faltering QuadrigaCX cryptocurrency exchange says it recently found more than $900,000 in digital assets — only to see more than half of those crypto-coins escape its grasp.

The bizarre turn of events was revealed Tuesday in the first court report submitted by Ernst and Young, which was appointed monitor Feb. 5 when the Nova Scotia Supreme Court granted the insolvent company protection from its creditors.

READ MORE: B.C. cryptocurrency exchange gets court orders amid hunt for $180M in assets

The report says the monitor learned last week that QuadrigaCX was holding $902,743 in Bitcoin, Litecoin and Ether cryptocurrencies in so-called hot wallets — but something went wrong on Feb. 6.

Ernst and Young says QuadrigaCX “inadvertently” transferred 103 Bitcoins valued at $468,675 to so-called cold wallets, which the company is now unable to access.

“The monitor is working with management to retrieve this cryptocurrency from the various cold wallets, if possible,” the report says. ”The monitor has made arrangements to transfer the remaining cryptocurrency into a cold wallet which will be retained by the monitor.”

About 115,000 QuadrigaCX customers are owed about $70 million in cash and $190 million in Bitcoin and other cryptocurrencies.

The Vancouver-based exchange was shut down Jan. 28, more than a month after its CEO and sole director — Nova Scotia resident Gerald Cotten — died while travelling in India, leaving his company without access to much of its cryptocurrency.

His widow, Jennifer Robertson, has said in court documents that Cotten was the only person with access to his laptop, which is thought to contain the digital keys to the cold wallets.

Cold wallets are offline storage devices protected by encryption technology. Cryptocurrency exchanges typically use them to store the bulk of their digital assets, which puts them beyond the reach of online hackers.

Hot wallets are online sites that store smaller amounts of cryptocurrencies, making them readily available for trading — a practice akin to using a currency float in a cash register.

The latest twist in the QuadrigaCX case is sure to feed rampant online speculation about the company’s dealings. Court documents have pointed to persistent rumours about Cotten’s death and threats aimed at his widow, who lived with Cotten just outside of Halifax.

Aside from the cold wallet snafu, Ernst and Young also reported that there is more than one laptop at the centre of the case.

Electronic devices recently retrieved from an encryption expert working for QuadrigaCX include: two active laptops; two older model laptops; two active cellphones; two dead cellphones; and three encrypted USB flash drives.

As well, steps have been taken to retrieve Cotten’s desktop computer from his home office in Fall River, N.S.

Michael MacDonald, The Canadian Press

Like us on Facebook and follow us on Twitter

Just Posted

Bunkhouse opens at Midway museum

Operators expect the nightly fee to be around $30

Midway seniors voice hopes, fears for aging in village

The village will host another public forum on aging on July 17

BCSS graduates off to new adventures

The BCSS Class of 2019 is the 50th cohort of Grade 12s from the school

Category 3 fires to be prohibited in Southeast Fire District

The prohibition will take effect at noon on Wednesday, June 12

Passion for planes takes off

The Grand Forks Flying Club is trying to build young interest in aviation

10 facts about Father’s Day

Did you know that the special day for dads was first celebrated in 1910?

B.C. VIEWS: When farmland protection doesn’t protect farmers

Secondary residences aren’t mansions, families tell Lana Popham

Bombers down B.C. Lions 33-23 in season opener

Former Lion Andrew Harris leads Winnipeg with 148 rushing yards

Northern B.C. family remembers murdered Indigenous woman with memorial walk

Still no closure for Ramona Wilson’s family 25 years later

B.C. university to offer mentorship program for former youth in care

Students using the provincial tuition waiver program will soon be able to form a community at KPU

You might not know these B.C. records are public

Hired a lawyer to file a civil claim? Those are published online

B.C. bus driver loses case to get job back after texting while driving full bus

An arbitator ruled that Tim Wesman’s phone usage was a “a reckless disregard for public safety”

Revamped B.C. Lions set to battle veteran Winnipeg Blue Bombers

The Lions’ first test of the season will be a big one

No business case for Trans Mountain expansion, says former environment minister

Cabinet is expected to announce its decision on the expansion of the Alberta-to-B.C. pipeline by Tuesday

Most Read