Quadriga's cryptocurency goes missing in fresh revelation to the saga

A collection of various coins with cryptocurrency logos embedded onto them
(Image credit: Shutterstock)

Last month we reported on the death of Gerald Cotten, founder of QuadrigaCX because he didn't tell anyone the seed to his cold wallet, losing $145 million of company funds in the process.

Another revelation on the story has emerged, after much time and resources were thrown at the locked wallets in an attempt to recover their contents, the wallets were finally cracked, according to the BBC.

The only issue is that the inaccessible money leading to the exchange's closure does not reside in Cotten's cold wallets.

The investigation launched by E&Y, the firm appointed to crack the cold wallets containing funds from 115,000 of the exchange's customers, found that the wallets had been cleaned out months before the deceased founder died.

In a report by the professional service company, it said that 14 other accounts had been identified as possible mediums through which the exchange's funds were moved. The accounts were "created outside the normal process" and created under many aliases from inside the company.

A $100,000 reward has been offered for information that could lead to the discovery of the lost funds. E&Y is now following the transaction trails through the various ledgers of the missing tokens.

Bitcoin, Bitcoin Cash, Bitcoin Cash SV, Bitcoin Gold, Litecoin and Ethereum tokens all comprised the nine-figure sum of lost money meaning investigators will have to undergo the arduous task of following the transactions through the mass of data that is held on a blockchain.

The wallet held just shy of 430,000 Ethereum tokens which equate to roughly 0.5% of all Ether in existence, according to one market analyst.

The findings are certainly thought-provoking. What was Cotten's motive behind clearing the funds from Quadriga wallets before he died? Is there something more criminal behind the string of events?

What happened to Cotten?

Founder of Canada's largest crypto exchange, Gerald Cotten unilaterally controlled the exchange's cold wallets used to securely store company funds offline in the case of a security breach.

In December 2018, Cotten died in India after suffering from Chron's disease. Cotten's wife Jennifer Robinson filed an affidavit saying that Cotten had sole access to the cold wallet containing the massive amount of cryptocurrency the exchange needed to conduct business.

"The normal procedure was that [Cotten] would move the majority of the coins to cold storage as a way to protect the coins from hacking or other virtual theft," the affidavit read.

A cold wallet is one that stores cryptocurrency but is not connected to the internet and is therefore safe from any cyber heists. It's a popular security measure taken by other exchanges such as Binance and Coinbase.

Usually, there are failsafe measures in place in the form of multi-signature systems that allow companies to regain access to cold wallets in the event that they become inaccessible by others. This wasn't the case with QuadrigaCX, though.

Despite losing access to the funds in December, QuadrigaCX continued to operate for nearly a month using liquid assets stored in hot wallets and fiat currency accounts.

Connor Jones

Connor Jones has been at the forefront of global cyber security news coverage for the past few years, breaking developments on major stories such as LockBit’s ransomware attack on Royal Mail International, and many others. He has also made sporadic appearances on the ITPro Podcast discussing topics from home desk setups all the way to hacking systems using prosthetic limbs. He has a master’s degree in Magazine Journalism from the University of Sheffield, and has previously written for the likes of Red Bull Esports and UNILAD tech during his career that started in 2015.