Quadriga CX Investors Still In Limbo, As Canadian Regulators, Cops Take Hands-Off Approach

Blockchain, Crime, Investing, News, Regulation | February 8, 2019 By:

The bizarre Quadriga CX case, in which $145 million in cryptocurrency assets is allegedly locked up and inaccessible to its estimated 115,000 owners, took on more intrigue on Thursday.

British Columbia’s securities regulator said it does not have jurisdiction and plans no action, while the Royal Canadian Mounted Police would not say whether an investigation into the mysterious death of the exchange’s owner is underway.

Meanwhile, the Wall Street Journal reported that two independent investigators have concluded that the cryptocurrency isn’t merely inaccessible – its gone.

The Quadriga CX issue started with the unexpected death of its founder, Gerald Cotten, who founded the company in Dec. 2013. Cotten died on a trip to India, and his wife claimed that all of the passwords needed to access the exchange and the cold wallets where funds are stored were unknown to her. Reported attempts to hack into them were also unavailing, leaving little recourse for investors.

However, not everyone is buying into that story, and some are claiming funds have been transferred out of the accounts since Cotten’s death.

The British Columbia Securities Commission said Thursday that it had no knowledge of the exchange’s activities and “does not currently have any indication that Quadriga CX, the crypto asset trading platform, was trading in securities or derivatives or operated as a marketplace or exchange under British Columbia securities laws. As such, BCSC does not regulate it.”

To date, no Canadian cryptocurrency exchange has been recognized as a marketplace by Canadian regulators.

Quadriga CX was given creditor protection this week in Nova Scotia Supreme Court, essentially halting any legal claims against it.  Cotten resided near Halifax, Nova Scotia.

The Royal Canadian Mounted Police indicated it knows of the Quadriga CX firm, but declined to state publicly whether it is investigating.

The Wall Street Journal reported that two independent investigators claim Quadriga apparently transferred customer funds to other cryptocurrency exchanges, a method of potentially laundering money.

James Edwards, a cryptocurrency analyst who publishes a website called Zerononcense, said he reviewed publicly available transaction histories.

Edwards said he found no evidence of Quadriga controlling any cold storage wallets that held the large amounts the company claims. If the accounts existed, then at some point transactions should have appeared, Edwards said.

Another analytics firm contacted by the WSJ, Elementus Group, came to the same conclusion.

Exchanges where Quadriga CX had accounts, including Poloniex, Kraken and ShapeShift, were reportedly looking into the allegations.