EY Report: QuadrigaCX Sent $500K in Bitcoin to Dead CEO’s Wallets

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The controversy surrounding Canadian crypto exchange QuadrigaCX might not be over anytime soon. According to reports published (PDF) by the Monitor on the case Ernst and Young (EY), the exchange “inadvertently” transferred around $500,000 CAD in Bitcoin to the cold wallets it’s been having problems accessing.

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More Money Lost

The Ernst & Young report titled “First Report of the Monitor” states:

On February 6, 2019, Quadriga inadvertently transferred 103 bitcoins valued at approximately $468,675 [CAD] to Quadriga cold wallets which the Company is currently unable to access. The Monitor is working with Management to retrieve this cryptocurrency from the various cold wallets, if possible.

The exchange had hired ‘Big Four’ audit firm EY to monitor proceedings in the creditor protection case.

Blockonomi had reported about the death of QuadrigaCX’s CEO Gerald Cotten, who reportedly passed away in India with the passwords and private keys to the exchange cryptocurrency cold wallets. Since the exchange can’t access its cold wallets, the new transfer of $500,000 CAD in Bitcoin sent to the wallet is gone, as well.

The exchange’s customers and its creditors can only take solace in its hot wallets, which the exchange can access, but the hot wallets have less than $1 million in them, which is a long shot away from the $150 million owed.

EY will take control of the exchange’s hot wallets and transfer the remaining cryptocurrencies into its cold wallets pending when the case is resolved. At press time, these include 51 bitcoin, 33 bitcoin cash, 2,000 bitcoin gold, 800 litecoin, 0.014 bitcoin cash SV and 950 ether.

EY added in the report:

The Monitor was advised that Quadriga held the following cryptocurrency balances (with approximate Canadian currency equivalent aggregating to $902,743) within its hot wallets on its servers as at the Filing Date.

Per the report, EY is working with third-party payment processors to access the exchange’s fiat balances, and it has also taken control of various devices reportedly owned or used by former CEO Gerald Cotten, including laptops, encrypted USB keys, and cell phones.

The Existence of Cold Wallets

The new revelation from EY pours fuel to fire from independent researchers who still can’t find evidence to prove the existence of any cold wallet owned by the exchange.

Founder and CEO of non-custodial crypto wallet MyCrypto Taylor Monahan believe QuadrigaCX could be making claims up. Monahan had analyzed the three main Ethereum addresses used by the exchange, concluding that customers probably owned them and not by the Canadian exchange.

Based o[n] the actions via ShapeShift, I can only assume they were trading the ETH for BTC on Bitfinex/Poloniex as well. Regardless, these were customer funds. All 3 main addresses ultimately receive ALL customer deposits, which were then sent to a variety of exchanges.

Outspoken CEO of American exchange Kraken Jesse Powell had raised an eyebrow on the absurdity of the QuadrigaCX case.

“We have thousands of wallet addresses known to belong to QuadrigaCX and are investigating the bizarre and, frankly, unbelievable story of the founder’s death and lost keys. I’m not normally calling for subpoenas but if the Royal Canadian Mounted Police are looking into this, contact Kraken.”

While the debate on the existence of QuadrigaCX’s cold wallets rages on, the report from EY, points to the existence of a cold wallet the exchange can’t access.



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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