$262m of cryptocurrency goes to grave with exchange co-founder

Owner of cryptocurrency exchange dies unexpectedly, taking with him the only password for an account holding $262m of clients’ money.

Gerald Cotten, the owner of Canada's largest cryptocurrency exchanges, died suddenly.

The owner of Canada’s largest cryptocurrency exchange has unexpectedly died at the age of 30, taking with him the only password for a digital account holding AUD$262 million of customers’ money.

Internet forums began buzzing with conspiracy theories when Gerald Cotten, the co-founder and chief executive of QuadrigaCX, was reported by his wife to have died in December.

Jennifer Robertson revealed on January 14 that her husband had died from complications related to Crohn’s disease on December 9 while travelling in India, where he was opening an orphanage. However, Mr Cotten appears to have failed to leave behind any note of a password or key to a digital “wallet” containing Cdollars 250 million ($262m) of Bitcoin and other cryptocurrencies for 115,000 account holders.

An affidavit signed by his wife says that the company has not been able to access the funds since Mr Cotten’s death. Ms Robertson added that the company had hired a specialist in unlocking digital wallets but he was not successful.

Cryptocurrencies are digital currency systems that originated during the financial crisis after criticism of the way banks were looking after people’s savings. Bitcoin is the most popular. Since cryptocurrency exchanges, where people can trade currencies, are often hacked and lack the regulatory oversight of banks, most exchanges hold a significant portion of their money in a “cold” wallet that is not connected to the internet. This is transferred over to a “hot” wallet when needed. QaudrigaCX said that its missing money was in one such wallet.

“Transfers from the cold wallet to the hot wallet would occur when the hot wallet was running low and withdrawals were being sent to users. The transfer of coins from the cold wallet to the hot wallet was performed manually by Gerry,” Ms Robertson said.

Angry QaudrigaCX customers have been speculating that Mr Cotten faked his death after running into trouble. In January last year the Canadian Imperial Bank of Commerce (CIBC) froze five accounts linked to QuadrigaCX affecting 388 customers and worth Cdollars 25 million, citing confusion about who owned those savings. The funds were released by a court in Ontario on December 3, according to QuadrigaCX.

Ms Robertson said in her affidavit that the speculation was making it hard to cope with her husband’s death. The Canadian government has confirmed that a Canadian died in India and they had provided assistance to the family but, under the Privacy Act, could offer no more information.

Customers of QuadrigaCX suffered a further blow last week when the company revealed that it had filed for creditor protection in Nova Scotia.

A statement from the exchange, which is based in Vancouver, said: “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.”

The Times