MORE THAN 100,000 cryptocurrency holders have learned a hard lesson in finality, after the 30-year-old CEO of a major Canadian exchange died, effectively freezing the company’s assets.
In an affidavit filed in the Supreme Court of Nova Scotia last week, Jennifer Robertson, widow of QuadrigaCX CEO Gerry Cotten, wrote that the company owes its customers $190 million, but can’t access the funds to pay them back.
In an unusual setup, Robertson said Cotten was the only person with the cryptographic keys to access $137 million of cryptocurrencies kept in “cold” storage to mitigate the risk of hacks. The remainder is similarly frozen, in cash, by ongoing disputes with a bank and payment processors.
The six-year-old company is now seeking protection from its creditors as it attempts to access the lost funds. Robertson’s filing was first reported by Coindesk.
A copy of his will obtained by the Globe and Mail, dated Nov. 27, including $100,000 for the care of his two pet chihuahuas
On Tuesday, a Halifax judge granted Quadriga a 30-day stay while it searches for the lost crypto, temporarily shielding the company from lawsuits by customers, some of whom reportedly own millions that are now stranded.
Robertson, who wrote that she has become “significantly more involved in the issues” facing Quadriga since Cotten’s death, says she has his encrypted laptop and USB, which may hold the cryptographic keys to the cold storage funds, but doesn’t have the credentials to log in. She says a search of their Nova Scotia home for her husband’s business records turned up nothing, and attempts to hack the laptop by a security contractor have been unsuccessful. According to the CBC, the hardware will be turned over to an independent court-appointed lawyer.
Robertson revealed Cotten’s death on January 14 in a post on Quadriga’s Facebook page. “Gerry died due to complications with Crohn’s disease on December 9, 2018 while travelling in India, where he was opening an orphanage to provide a home and safe refuge for children in need,” she wrote. Her affidavit says Quadriga’s automated systems continued to accept deposits until January 26, more than a month after Cotten’s death.
Quadriga’s strange tale is just the latest mishap to hit cryptocurrencies. Exchanges, in particular, have been the targets of hackers, racking up billions in losses. To reduce exposure, many custodians of cryptocurrency divide the funds between so-called “hot” wallets, used for day-to-day transactions, and offline “cold” storage, which is much harder for hackers to access.
In this case, that backfired, because Cotten was allegedly the only person with access to the keys. A copy of his will obtained by the Globe and Mail, dated Nov. 27, including $100,000 for the care of his two pet chihuahuas, but apparently no contingency for his personal crypto or business affairs.