It sounds like the plot of a business crime: the founder of a crypto exchange dies of a rare disease. He leaves a laptop. But the bank employees are no longer able to approach the money. The password and the recovery key can not be found. The deceased founder took the secret to the grave – and presumably also the money deposits.
No access to the deposits
But in turn. On December 9, 2018, Gerald Cotten, founder of the Canadian crypto-money exchange QuadrigaCX, died unexpectedly on an India trip following the onset of Crohn’s disease, a chronic inflammatory bowel disease, at the age of only 30. However, the company announces the death notice on January 14, 2019 on Facebook.
Digital currency The currency: The concept of Bitcoin, the most well-known digital currency, was published eleven years ago under the pseudonym Satoshi Nakamoto. Anyone who hides behind this pseudonym is still unclear. Functionality: Bitcoins are created and managed locally in a computer network. Simply put, bitcoins are exchanged electronically between the participants. Bitcoin Wallet: The wallet contains the bitcoins of a participant. Since bitcoins can only be transferred digitally, the wallet is more like a credit card that contains relevant data.
After death, the customers could no longer approach their deposits. You have to know two things for that. In contrast to trading venues for shares, crypto-money can be stored on crypto exchanges. Quadriga had 363,000 registered users, 115,000 of whom had deposited cash or Bitcoin for a total of $ 145 million. These deposits are only accessible via an alphanumeric code.
The catch: Cotten was the only one who had the access code. He had the digital safe key to the millionaire. Cotten’s wife said the laptop her husband ran the business from was encrypted. Despite repeated searches, she had failed to find the password or recovery key.
Conspiracy theories about faked death
Meanwhile, crypto platform employees were feverishly trying to unlock their cash balances, a back-up system that keeps keys in offline devices like a USB flash drive – in vain. They could not get to the crypto field. In a press release, the company said, “Quadriga was unable to open the cold wallets (…).”
The customer feels strange. In the online forum Reddit conspiracy theories circulate, Cotten could have faked the death and made with the money from the dust. Users report doubts about the authenticity of the death certificate issued by the Indian authorities. In addition, it must be possible to hack the laptop and so get to the key.
What fuels the rumor mill is the fact that Cotten wrote a will twelve days before his death. In it he explains to transfer all assets to his wife: several plots, a Lexus, an airplane, a yacht and his Chihuahuas.
Cotten was a wealthy man. Did he know that he would die soon? Or did he just want to use his wife as an heir per Forma so as not to be the subject of an investigation? Was this a well-arranged game?
Exit scams are not uncommon in the crypto community
In the meantime, a court in the Canadian province of Nova Scotia, where the crypto-exchange is based, has commissioned the consulting agency Ernst & Young to investigate the mysterious case. The problem is that Quadriga is a debtor who can not service creditors’ claims. On Reddit, angry users who feel cheated have published a wanted poster: “Wanted: Gerald William Cotten.” They accuse the businessman of the boyish features of the fraud. There is a suspicion in the room that Cotten may still be alive and has settled with the money.
Such exit scams are not uncommon in the crypto community. After the South Korean fintech startup Pure Bit collected $ 2.7 million in capital on an Initial Coin Offering (ICO), a virtual IPO, the website was shut down. The founder soon closed all the chat groups and left the unsuspecting victims a scrawny message: “I’m sorry.” Two weeks later, the director apologized for his “unforgivable mistake”: he was “blinded by money” and will compensate the investors ,
Similar case in Germany
A similarly curious case existed in Germany: After the start-up Savedroid collected 40 million euros from around 35,000 investors, appeared on the website, a picture from the US comic series “South Park”, provided with the words: “And it’s gone “(and it’s gone). The founder Yassin Hankir then tweeted photos from Egypt, which show him on the beach with a beer bottle, which caused fears that he had settled with the money of investors abroad.
The alleged fraud turned out to be a PR action. Hankir later said in an interview that he had received “death threats”. Investors in the Quadriga case must be prepared to avoid seeing their money so quickly.
Also published on Medium.