Clients Of Cryptocurrency Exchange ‘Lose’ $190 Million After Founder Dies And Nobody Knows The Password
It isn’t any secret that cryptocurrencies can be risky investments because of the possibility of fraud, high volatility, ties to rogue organizations, and potential to be hacked. Now there is a new reason to be concerned that investing in cryptocurrencies might be a bad idea — the founder of the cryptocurrency exchange dies, now nobody knows the password for the accounts in the cryptocurrency exchange and your money is now lost in cyberspace.
Gerald Cotten was the founder and CEO of QuadrigaCX, a Canadian cryptocurrency exchange platform. I say “was” because sadly Gerald died unexpectantly in December. Cotten reportedly died “due to complications with Crohn’s disease on December 9, 2018, while traveling in India, where he was opening an orphanage to provide a home and safe refuge for children in need.”
Not only did Cotten die, but so did access to the accounts at QuadrigaCX because he took the password to the cryptocurrency exchange to the grave with him. Nobody knows the password to the exchange, not even his own wife. “The laptop computer from which Gerry carried out the company’s business is encrypted and I do not know the password or recovery key. Despite repeated and diligent searches, I have not been able to find them written down anywhere,” said Jennifer Robertson, Cotten’s widow, in an affidavit.
Cotten was so serious about the security of the exchange’s cryptocurrency wallets that he kept them offline in encrypted USB drives and electronic devices that are not connected to the internet so that hackers couldn’t access them. Unfortunately, he was the only person who knew the password and when he died nobody has been able to access the accounts since.
Cotten was the only person who knew the passwords to QuadrigaCX’s “cold storage,” which has approximately 26,000 Bitcoin, 11,000 bitcoin cash, 200,000 Litecoin, and 400,000 Ether. There is an estimated $190 million on the locked account. The company’s “hot wallet” is accessible, but that has a far less amount since it is primarily used for transfers. A technical expert hired by QuadrigaCX was unable to bypass the encryption on the USB drives.
QuadrigaCX issued a statement on its website on January 31:
“For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us. Unfortunately, these efforts have not been successful.”
After Cotten’s death, QuadrigaCX applied for creditor protection in the Nova Scotia Supreme Court. A preliminary hearing is scheduled to happen on Tuesday where the company will ask to appoint Ernst & Young as an overseer for its financial issues and for creditor protection since they cannot access the funds in cold storage.
While Cotten did not make a contingency plan for access to the QuadrigaCX cold storage upon his death, the CEO did provide provisions for his two pet chihuahuas. In Cotten’s last will and testament, he left behind $100,000 for his two dogs. Good to know that the pooches will be taken care of with $100,000, but the $190 million owed to clients of the cryptocurrency exchange are currently out of luck.