QuadrigaCX CEO Was an Advocate for Storing Private Keys on Paper, Old Podcast Reveals

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In light of the discovery of a five-year-old podcast, it would appear that the story of QuadrigaCX and its pursuit of millions in digital currencies could take yet another turn. As Blockonomi reported, Gerald Cotton, founder and Chief Executive Officer of the Canada-based cryptocurrency exchange, died of Chron’s disease while away in India.

Cotten’s death raised questions about the whereabouts of the exchange’s cold wallets, where the majority of its reserves were stored. As it turned out, Cotten was the only person who knew where the private keys were stored, rendering over $140 million of user’s funds inaccessible.

QuadrigaCX Review

However, it would appear that Cotton might have given people an idea of the method used by the exchange to store its assets, according to a Bloomberg report. Back in 2014, while speaking on the True Bromance Podcast in Vancouver, Cotten informed the hosts on various issues, including the state of the cryptocurrency industries in both the U.S. and Canada, the role of QuadrigaCX, and how the exchange manages its private keys.

Speaking on the private keys of the wallets, Cotton said, “It’s like burning cash in a way. Even the U.S. government, with the biggest computers in the world, could not retrieve those coins if you’ve lost the private key. It’s impossible to retrieve those.”

He explained how private keys work, and how they can improve the security of users’ digital assets. Touting their effectiveness, he advised on implementing their security offline, with no need to “keep that on your computer to use Bitcoin, if you’re not actually spending it.”

So, the best way to do it is take your private key, print it off, store it offline in your safety deposit box, vault, whatever, and then take the public key, which is your address, and use that to send money to it. So that way you can never have your Bitcoin stolen, unless someone, like, breaks into the bank, steals your safety deposit box and gets into your private key and so forth.

And Here We Are

As it turned out, the effectiveness of this security measures is precisely what QuadrigaCX is bemoaning right now, as CAD $190 million ($145 million) in digital assets, belonging to over 100,000 company investors, is locked away on the exchange’s cold wallets, which Cotton had access to.

The tragedy has led to the firm’s operations being shut down, while it continues to reorganize after being granted creditor protection by the Nova Scotia Supreme Court, with the help of independent auditing firm Ernst & Young Inc. (EY). With investor protection, QuadrigaCX will be given the freedom to “address the significant financial issues that have affected our ability to serve our customers.”

All a Big Scam?

The absurdity of the case, as well as the vagueness of the exchange regarding specific details, seemed to tick off many within the crypto community. Independent researchers were reportedly unable to find any evidence of QuadrigaCX owning any cold wallets, while Taylor Monahan, founder, and CEO of crypto wallet MyCrypto, shared her belief that the exchange could just as well be fabricating the story.

In a lengthy Twitter thread, Monahan claimed that she ran an analysis of the major Ethereum addresses used the exchange, concluding that the addresses received only customer funds and weren’t in any way owned by the trading platform.

The First Report of the Monitor

As a part of monitoring QuadrigaCX’s proceedings, EY released a report on the exchange’s activities. Titled the “First Report of the Monitor,” the auditing giant revealed that the exchange made inadvertent transfers of 103 Bitcoins (worth about $353,000 at the time) to the same wallets that it was unable to access.

Via the report, EY confirmed that they were “working with Management” on the possibility of retrieving the digital assets from the cold wallets. However, considering their inability to access the wallets since Cotten’s death, it’s highly unlikely.


Based in the UK, Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system. Follow him on Twitter: @adejimi or Contact

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