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A Major Canadian Bitcoin Exchange Has A Big Problem
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A Major Canadian Bitcoin Exchange Has A Big Problem

Bitcoin and cryptocurrency exchange Quadriga, the largest crypto exchange in Canada, has said it’s lost access to millions of dollars worth of bitcoin and other cryptocurrencies after the exchange’s chief executive and co-founder died suddenly late last year—taking the passwords and recovery keys to computers with him. 

Bitcoin and other cryptocurrencies valued at some $190 million are now locked in a so-called cold storage wallet, leaving investors and users of the exchange unable to access their funds and whipping up fresh concerns about the future of digital currencies.

The bitcoin price, as well as the wider cryptocurrency market, has failed to react strongly to the reports, with the bitcoin price currently trading up by 1.5% over the last seven days

Gerald Cotten was in India to open a local orphanage in December last year when he died from complications of Crohn’s disease, according to the company, which announced the news via Facebook. 

Cotten’s widow Jennifer Robertson said a 31 January court filing, first reported by bitcoin and crypto news site CoinDesk, Quadrigae owes its customers $190m in cash and cryptocurrency and has filed for creditor protection.

“Quadriga’s inventory of cryptocurrency has become unavailable and some of it may be lost,” Robertson wrote in the filing. “The normal procedure was that [QuadrigaCX founder and CEO Gerald 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 laptop computer from which Gerry carried out the companies’ 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.”

The news has prompted many users of the exchange as well as others in the bitcoin and cryptocurrency space to question whether Cotten is really dead, some of whom have suggested digital tokens controlled by the exchange have moved since he was reported dead.

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According to report filings Quadriga holds around 26,500 bitcoin ($92.3 million), 200,000 litecoin ($6.5 million) and some 430,000 ether ($46 million), as well as over $2 million in bitcoin alts, bitcoin cash, bitcoin SV and bitcoin gold.

Quadriga has been dealing with problems around users withdrawing funds for months following a long legal battle with one of its banking partners last year.

In October last year, Canadian Imperial Bank of Commerce (CIBC) froze some $28 million of assets held by Quadriga after it was unable to identify the real owners of the funds.

“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,” a message posted to Quadriga’s website read, which has replaced the usual website features.

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The latest bitcoin exchange problem will deal a further blow to the burgeoning bitcoin and cryptocurrency sector, which has been rocked multiple times over its short 10-year lifespan by exchange scandals, thefts and data breaches.

There have been calls from governments around the world to regulate bitcoin and crypto exchanges and business in the same fashion as the traditional financial services industry, which would require them to better protect customers from losses.


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