Dead QuadrigaCX Founder Stole & Lost $80 Million+ of Client’s Crypto

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Amid news that TD Ameritrade, Fidelity Investments, E*Trade, Facebook, and Microsoft continue to delve into the Bitcoin and cryptocurrency space, the spotlight pointing at QuadrigaCX has seemingly been turned off.

But, all eyes are focused on the disgraced, now-defunct Canadian digital asset exchange once again, with news that its founder misappropriated customer funds for his own use. This confirms long-held hearsay that arose on Canadian cryptocurrency forums months, if not years back.


Millions Worth of Bitcoin Lost by QuadrigaCX Founder

It’s been nearly half a year since QuadrigaCX closed after it lost its founder to a health issue, but many are still trying to pick up the pieces. In a recent report published by Ernst & Young, a “Big Four” auditor tasked with presiding over this crazy case, it was revealed that, as some suggested, founder Gerald Cotten was running a fraudulent crypto exchange. Toronto-based litigator Evan Thomas broke down the report.

Per this new document — an exposé if you will — Cotten had, over the years, created fake accounts on QuadrigaCX with equally as fake “dollars” to purchase legitimate Bitcoin, Ethereum, and Litecoin from users. From there, he then sent this cryptocurrency to accounts at other exchanges under his name.

What’s worse, he didn’t just sell what he embezzled, but he gambled with it. Almost like some crazy speculators during 2017, Cotten purportedly used margin, meaning leverage, to trade (and often lose) the cryptocurrencies that weren’t exactly his.

According to logs, which are hard to come by to begin with, Cotten transferred 9,450 BTC, 387,738 ETH, and 239,020 LTC out of Quadriga — an amount of cryptocurrency worth dozens of millions of dollars at current valuations. What’s weird is that the report implies that Cotten may have traded even more Bitcoin than the logs suggest.

One “unnamed exchange” received 21,501 BTC to an account under the Canadian businessman’s name. As of the time of writing this, there are purportedly eight BTC left, amounting to a loss of $80 million. Ouch.

No Retribution

While there is now much more known about the case than when the news first broke that Cotten had passed, there has yet to be retribution for those affected by this debacle. The thing is, this news, coupled with previous reports on the subject matter, cast doubt on the idea that the creditors of QuadrigaCX will get their money back in full.

The following is a story about one affected, who lost $422,000 via the Canadian exchange after depositing Bitcoin. In a heartfelt tell-all posted via Youtube, Tong Zou, a Canadian-born Silicon Valley engineer, explained his story.

He explained that in late-2017, his Silicon Valley peers were cashing in on the crypto craze, as he sat on the sidelines. But as the market peaked, he FOMOed in, taking out three self-described “stupid” loans from the bank to invest into cryptocurrencies, like Bitcoin, Ethereum, XRP, Cardano, among other popular assets. Eventually, he managed to pay his debts by liquidating his stake in a Bay Area apartment, leaving him with $400,000 left over.

As he already had plans to move to Vancouver, where QuadrigaCX was supposedly located, the technologist tried to find ways to take advantage of good exchange rates. Eventually, he decided on using Bitcoin and QuadrigaCX as a medium, as he hoped that he could not only transfer value quickly, but turn a profit too due to the exchange’s Bitcoin-to-CAD risk premium.

Of course, when he decided to issue a withdrawal request, the money never came…

There are presumably hundreds, if not thousands that are in Zou’s boat. And as it stands, they are seemingly only slated to receive a portion of the funds. But, the United States Federal Bureau of Investigation was recently reported to have picked up the case.


I am a writer who has been following the cryptocurrency space since 2013. My insights and interviews have been featured in leading publications in the industry such as LongHash, NewsBTC, and Decrypt. When I am not writing, I work as a team member of the EXODUS division of HTC, a Taiwanese electronics company. I own a small amount of Bitcoin. Contact

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