Cryptocurrency exchange loses $145 million after CEO takes passwords to the grave

Cryptocurrency exchange loses $145 million after CEO takes passwords to the grave

Experts brought in to try to hack into Cotten's other computers and mobile phone met with only "limited success" and attempts to circumvent an encrypted USB key have been foiled, his widow, who lives a suburb of Halifax, said in the court filing.

Access to Quadriga CX's digital "wallets" - an application that stores the keys to send and receive cryptocurrencies - appears to have been lost with the passing of Quadriga CX Chief Executive Officer Gerald Cotten, who died December 9 in India from complications of Crohn's disease.

The Canadian cryptocurrency exchange QuadrigaCX owes its customers about $US190 million, or 249 million Canadian dollars, according to CoinDesk. No conclusive figures could be pinned, but the researcher also divulged that Quadriga enlisted the use of fractional reserves to service its customers, using client deposits to issue withdrawals.

They say about 115,000 Quadriga users hold balances in their personal accounts in the form of cash obligations and cryptocurrency.

"The transfer of coins from the cold wallet to the hot wallet was performed manually by [Cotten]", the affidavit from Robertson states.

Cotten's widow, Jennifer Robertson, has filed for creditor protection, saying that the firm can not access coins in "cold storage", Coindesk reports.

As customers panicked and tried to withdraw their funds QuadrigaCX went off the grid
DAN KITWOOD GETTYAs customers panicked and tried to withdraw their funds QuadrigaCX went off the grid

Meanwhile, Quadriga has filed for a stay of legal proceedings to allow the company and "its contractors additional time to find whatever stores of cryptocurrency may be available", Robertson wrote. Robertson said Cotten held "sole responsibility for handling the funds and coins", according to the document.

While Robertson has Cotten's laptop, it's encrypted and she does not have a password or recovery key. Discussion boards on Reddit are peppered with skeptical comments about the company's efforts to work out its issues, and some users say they have upward of $80,000 or $100,000 that has been locked away from them.

"If this can not be done in an orderly fashion, many, if not all users, may suffer damage", she wrote.

Vancouver-based QuadrigaCX says it filed an application for creditor protection on January 31 and the Nova Scotia Supreme Court will be asked on February 5 to appoint a monitor to oversee the proceedings.

Robertson said Quadriga would consider selling its cryptocurrency platform as an option to fulfill its obligations to customers and creditors.

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