The story behind the $190 million Gerald Cotten took to his grave

In December 2018, Gerald Cotten, founder of the Canadian crypto exchange QuadrigaCX, died at the age of 30 during his honeymoon in India. He was the only person with access to the encrypted laptop on which he ran the company. Around 115,000 customers discovered that their money was stuck in so-called cold wallets that no one else could access. But the reality turned out to be even more shocking than a forgotten password.

In brief:

• Gerald Cotten died in December 2018 and was the only person with access to QuadrigaCX’s wallets.
• Customers were missing a total of about 250 million Canadian dollars, but the wallets turned out to have been emptied months earlier.
• The Ontario securities regulator concluded that QuadrigaCX was a Ponzi scheme.

A death that raised more questions than answers

Cotten died on 9 December 2018 in a hospital in Jaipur, India. He suffered from Crohn’s disease and died from complications related to it. Three days later, his death was officially registered in Halifax, but the announcement followed only a month later.

That moment caused great unrest. Customers of QuadrigaCX, at the time Canada’s largest crypto exchange, heard that around 250 million Canadian dollars in funds were held in cold wallets and that only Cotten knew the access codes. Creditors asked the police to exhume his body to confirm his identity. The internet quickly concluded that he had faked his own death and was somewhere in Belize.

That all turned out to be beside the point.

Wallets already empty before Cotten boarded the plane

In March 2019, accountants managed to identify six of the cold wallets. They were all empty. And not because someone had gained access after Cotten’s death: the wallets had already been emptied in April 2018, eight months before he left for India.

The Ontario securities regulator, the Ontario Securities Commission, investigated the case and concluded that QuadrigaCX was in fact a Ponzi scheme. Cotten had run the company as such. Customers ultimately suffered a loss of about 169 million Canadian dollars, equivalent at the time to around 190 million US dollars.

The story of QuadrigaCX has since become a symbol of the risks of centralised crypto exchanges in which one person has complete control over the funds of hundreds of thousands of customers. Platforms such as Coinbase have since placed greater emphasis on transparency and proof of reserves, partly in response to scandals such as that of QuadrigaCX.