Crypto Calamity, And A $136 Million Balck Hole


Because a Canadian crypto-exchange founder, CEO, and sole employee died without having divulged the password, about $136 million worth of customers’ holdings are stuck in an electronic vault and are unattainable. The Canadian crypto-exchange QuadrigaCX is facing a tough time after its 30-year-old founder, Gerald Cotten, died unexpectedly from Crohn’s Disease while traveling in India in December 2018. His widow says that he took the only key with him, which would allow her to access their customers’ mega- millions of cryptocurrency.

Much to the dismay of many coin-holders, Cotton reportedly did not share his passwords with anyone before his death preventing his widow, Jennifer Robertson, from unlocking his laptop.  “Quadriga’s inventory of cryptocurrency has become unavailable and some of it may be lost,” Robertson wrote in the filing. The news has been made public now that the issue is circulating through the courts. This sad saga underscores only one of the many pitfalls of investing in cryptocurrency—especially with smaller, more obscure exchanges.

Robertson is in possession of Cotton’s laptop but writes that it is of little consequence as she is unable to open it. “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.”

It is a bit ironic that Cotten, made very rich via cryptocurrency died while in India on a humanitarian/charitable endeavor involving poor children. Next, many investors who stand to lose money if this doesn’t get sorted will be precluded from using their largesse for charities of their own choosing. The last bit of irony is that QuadrigaCX continued to accept funds after Cotten’s death. Yet, at least no new funds were accepted by directors on 26 January, though it took more than a month from news of his death to take that action. In total, the exchange owed users about CAD$70 million in fiat Canadian dollars, and CAD$180 million worth of cryptocurrencies including Bitcoin, Bitcoin Gold, Ether and Litecoin.

Cotten’s widow– who has received threats of harm, ostensibly from shareholders–has retained an expert to try to access the funds but he has so far not been able to do so. Conspiracy theorists have gone so far as floating the idea that this may be a scam concocted by Cotten and his wife and he is not really dead. The fact that Cotton may have changed his will just two weeks before his death is also deemed suspicious as is the unconfirmed report of one of the co-founders being a convicted fraudster.

There is some good news, however. Some customers’ coins may be held in other exchanges, which could access the funds. But it just reinforces the notion of the vulnerabilities inherent in crypto currency investing and why caveat emptor—buyer beware– should be the watchwords if you do choose to dabble in the digital currency. This isn’t the first instance, nor the largest, of investors losing big money in cryptocurrency—just the latest. With cryptocurrency there is apparently more to worry about than the rise and fall of the coins value.

As investors have told me personally over the years, the return on their investment is not nearly as important as the return of their investment.

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