Quadriga

In 2013, Ontario-born Gerald Cotten co-founded the cryptocurrency exchange QuadrigaCX. Over the next five years, Quadriga would handle billions of dollars in crypto exchanges, cementing itself as Canada's premiere digital exchange platform. However, Cotten's untimely death in December of 2018 would reveal the house of cards he had built...

In the early days of 2009, an open-source computer program named Bitcoin was launched.

Bitcoin was created in the midst of a large global recession, which was not only affecting American and European markets, but was having virulent repercussions all over the globe. The mysterious creator of this program - who went by the alias of Satoshi Nakamoto - made it clear that they were hoping to create a financial system that wasn't controlled by financial institutions or government entities.

Over the next several years, the saga of Bitcoin would begin to unfold, intersecting between the economic and technology worlds... and potentially changing how we, human beings, view the idea of currency moving forward.

For the first few years of its existence, Bitcoin was virtually worthless. Cryptocurrency enthusiasts would mine and stockpile Bitcoin for pennies on the dollar, in the hopes of accumulating enough to sell for a small fortune in the distant future; but almost all involved knew that any such effort would require months - if not years - of patience.

When Bitcoin finally started to gain value (between 2011 and 2012), it was used primarily in the seedy corners of the internet. Darknet website like the Silk Road provided a practical use for Bitcoin, but it wasn't until the middle of the decade - around 2015 or so - that other websites began to accept Bitcoin as a legitimate digital currency. By then, cryptocurrency exchanges and markets had been established - which exchanged real money into bitcoin and vice/versa - and dozens of copycats had been quickly thrown together, hoping to seize upon the momentum of the cryptocurrency bubble.

That market had also seen a countless number of scammers, schemers, and hackers, who took advantage of the anonymous nature of cryptocurrency for their own benefit.

In 2018, one of the more peculiar events in crypto history began to play out, which continues to have wide-ranging ramifications well into 2019.

This is the story of Quadriga.

Gerald William Cotten was born on May 11th, 1988.

A Canadian, he grew up in Belleville, Ontario, and eventually began attending York University in the mid-2000's - not too far away from home, in Toronto. There, he attended the Schulich School of Business, and worked his way towards a Bachelor's Degree in Business Administration.

Post-graduation, Gerry - as he was known among family and friends - continued to live and work in the Toronto region. It was at around this time that he began to grow increasingly interested in cryptocurrency, which was beginning to explode in popularity. His first major interest was in the most popular form of crypto, Bitcoin, which he began to invest in almost immediately, before the market started to take off.

After dipping his toes in this exciting and bold unexplored market, Gerry Cotten decided to jump in headfirst. His initial interest had exposed him to the underground crypto community, and - soon enough - he had become a CBP: a Certified Bitcoin Professional. The CryptoCurrency Certification Consortium, who designates such labels, describes CBP's as:

"Certified Bitcoin Professionals are able to apply Bitcoin technology to their professional area of expertise and understand privacy aspects, double-spending, and other issues that relate to the currency."

Despite being very young and relatively inexperienced in business matters, Gerald Cotten was able to quickly understand a void in the cryptocurrency market; a void which others were trying to fill, but failing to fully address.

Here he is addressing the origins of his company to a 2015 DrinkDemos panel.

By 2013, Gerald Cotten had moved from Toronto to Vancouver, British Columbia, where he would found the company Quadriga alongside a friend of his named Michael Patryn (more on him later).

Quadriga was created in November of 2013, with the overarching parent company being branded as "Quadriga Fintech Solutions." The main company, however, was named QuadrigaCX, which stood for Quadriga cryptocurrency exchange. This company would do exactly what it's name stated: exchange money into crypto, and vice/versa.

The digital exchange, which would be Quadriga's largest platform, would launch on Boxing Day of 2013 (December 26th). Initially, Quadriga only started as a service for those in the local market, but would quickly become one of Canada's premiere cryptocurrency exchanges - almost by default, really. It was just one of a handful launched over the next several years, and just-so-happened to outlast most of its competitors.

In 2014, Quadriga would install the second Bitcoin ATM in Vancouver, and would exchange just a bitcoin or two here and there. But by the end of the year, they had four employees - with offices in Vancouver and Toronto - and had done more than $7.4 million in exchanges. They seemed well-poised to continue their expansion into 2015 and beyond.

Here is Gerald Cotten speaking at a 2015 Decentralized conference, in which he explores the exciting future possibilities for Quadriga.

Despite the outward appearance of all seeming to be well, Quadriga was beginning to struggle in 2015.

As you just heard, founder and CEO Gerry Cotten was floating the idea of taking the company public - stating his intentions to take the company public by the end of the year. However, this decision had left many of the other company directors disgruntled, as they all knew that the company had been facing a cash shortage in the prior months. In fact, leading up to January of 2015, the company had earned only $22,168 in cryptocurrency commissions, but had lost close to $90,000 in upkeep and operational costs. Quadriga was bleeding cash.

Looking back, many consider the public position of Gerald Cotten to be a bluff: some believe that he never had any intention of listing the company on the Canadian Securities Exchange, but instead used this positioning to raise upwards of $850,000 in capital.

That would only seem to be a deferral, though, as the company had blown through that capital by the summer of 2015. Quadriga ran out of money in June of 2015, and most (if not all) of Gerald's fellow directors and employees left the company. This including Michael Patryn, who left Quadriga after getting in a dispute with Gerry over the decision to take the company public.

Ironically, this decision would end up becoming a non-issue by the end of the year. By 2016, Gerald Cotten had decided NOT to take the company public and list on the Canadian Securities Exchange. It was possible that he didn't want to publicly disclose financial statements for the company, but we can only guess at his reasons now.

Through that year, Quadriga continued on as a one-man operation, with Gerald Cotten overseeing almost every facet of the company by himself. He could do everything through his laptop, and seemed willing to stick around, believing that the cryptocurrency market was about to blow up. He added more options to the QuadrigaCX platform - allowing users to not only exchange bitcoin for cash (and cash for bitcoin), but added options for other cryptocurrencies, such as Litecoin and Etherium.

Quadriga would continue handling millions of dollars worth of crypto exchanges through 2016, but 2017 was the year that Bitcoin finally blew up - and drew a bunch of added interest to the crypto market. That year, the average price of a Bitcoin jumped from around $1000 to a peak value of more than $20,000. With it, QuadrigaCX was no longer handling millions of dollars in cryptocurrency exchanges, but more than a billion dollars in exchanges. Because of their business model, they took a small percentage of each transaction in commission, and Gerald Cotten found himself an overnight millionaire.

Surprisingly, this led to a number of additional issues. Despite revenue no longer being a problem, Quadriga did not have a real accounting system. After all, the company was essentially operated by Gerald Cotten on whatever laptop he was using at the time, and had been relying on external payment processors to handle transactions. This led to a number of cash flow problems, as it was never quite clear how much of the company was held in liquid assets versus cryptocurrency, which are often kept anonymous.

To make matters worse, Quadriga lost approximately $14 million worth of value to a scripting error with the cryptocurrency Ether. Sadly, that was one of the dangers when working with cryptocurrency.

Similar issues would continue to plague the company well into 2018, despite the company moving and making more money than ever. The cash flow problems continued, eventually leading to longer delays for QuadrigaCX customers. Through the first half of the year, customers of the exchange reported having to wait hours - if not days - for cash withdrawals. This was made all the more troubling when you factor in the ensuing crash of the Bitcoin market, which would collapse by more than half of its peak 2017 value through the year; highlighting the volatility of the crypto market.

When pressed for why it was taking longer and longer for customers to exchange their bitcoins and other cryptocurrencies for actual cash, Quadriga CEO Gerald Cotten had an explanation: it was all tied into a legal battle that he had been waging against the Canadian Imperial Bank of Commerce since January of that year.

In January of 2018, roughly $28 million that had been moved through Quadriga was frozen. This was money that had been moved through one of Quadriga's payment processors, Costodian Inc.

The Canadian Imperial Bank of Commerce (commonly abbreviated as CIBC) had noticed money moving through these accounts into the personal accounts of the owner of Costodian Inc, Jose Reyes. This issue includes some pretty complicated legal and accounting jargon, which I hardly understand, but - basically - the $28 million from Quadriga had come from 388 different depositors. CIBC had received requests from 7 out of those 388 Quadriga depositors to withdraw their money, but because of the fluid nature of the assets moved by the cryptocurrency exchange, there was no way for CIBC to determine who the money actually belonged to.

So, the Canadian Imperial Bank of Commerce had frozen the money in an attempt to figure out who the money belonged to. They were hoping to divert it back to its rightful owner, but this would require at least a brief investigation into the accounting practices of both Quadriga and its payment processor, Costodian.

CIBC had made repeated attempts to get in-touch with Quadriga employees or its CEO/founder Gerald Cotten, but could not do so. All of their calls went unreturned, and emails were bounced right back to them. After repeated failed attempts to make contact with Quadriga, CIBC asked for a court to take possession of the $28 million in frozen assets and determine its rightful ownership.

This came at a time where Bitcoin prices were dropping dramatically, having lost more than 60% of its value in a span of months. During such a time, $28 million wasn't exactly chump change, and could have a significant impact on Quadriga's bottom-line.

An Ontario Superior Court took possession of the $28 million, and court proceedings kicked off shortly thereafter. In an email to The Globe and Mail publication, Quadriga CEO Gerald Cotten wrote about the impact of these frozen assets as they pertained to Quadriga customers:

"There are currently delays for some specific withdrawal options, particularly due to the fact that CIBC is withholding tens of millions of dollars that belong to us that were in an account of one of our payment processors."

Cotten asked for the money to be returned to him and Quadriga, and filed in a legal motion:

"This court should not succumb to the bank's unsubstantiated and highly offensive speculation that there must be shady dealings afoot because Quadriga's business is a trading platform for individuals trading in cryptocurrencies."

As you can imagine, this $28 million in frozen money resulted in even longer delays for Quadriga customers. What had started out as hours or day-long waits to exchange cryptocurrency for cash was now becoming weeks or months-long waits, with some Quadriga customers having to wait roughly half-a-year to withdraw their money. Some chose to just give up and leave their money invested in cryptocurrency through QuadrigaCX, having been unable to receive payouts or exchange it for cash in a timely manner.

Gerald Cotten wrote numerous emails to Quadriga customers, blaming the Canadian banking system for "conspiring" against him and other cryptocurrency exchanges. In one email, he even wrote:

"The number of individuals in the bitcoin community that have been shut out of the banking system is staggering."

Gerry directly blamed this freeze on $28 million in assets for Quadriga's inability to pay out accounts, even though the company had handled more than $1.4 billion in crypto exchanges the year before.

This debate carried on until November of 2018, when Judge Glenn Hainey of the Ontario Superior Court sided with the Canadian Imperial Bank of Commerce. Judge Hainey ruled that it was unclear who actually owned the $28 million in frozen assets, and the money was turned over to the Superior Court for further investigation.

This was a major setback to the business aspirations of Quadriga CEO Gerry Cotten, who publicly put on a brave face. In emails to Quadriga customers, he hoped that the issue could be resolved before the winter holidays.

"More importantly, the court has made no ruling yet on whether CIBC acted appropriately in freezing the funds in the first place. Regarding this point, we are considering our next steps."

While things were progressing unexpectedly in his professional life... in his personal life, Gerald Cotten had now married, and prepared to move on into the next step of his life: his thirties.

Gerald and his wife, Jennifer Robertson, had married at some point in 2018. The two had been friends for the better part of at least three years, and had been romantically involved for some time prior to their nuptials. In fact, between 2016 and 2018, the couple had invested in multiple real estate properties throughout Canada, including a home in Fall River, Nova Scotia.

In addition to being the sole officer and director for Quadriga, Gerry was known as a funny, kind, and affable young man. He constantly cracked jokes, even in business environments, as that was believed to be his way of coping with stress - no matter how major or insignificant. In the interim five years, he had earned himself a solid reputation in the crypto community; particularly in British Columbia, where he had become one of the region's most relied-upon voices in Bitcoin.

Gerry was known to enjoy the finer things in life, and loved the activities that he was able to enjoy with the advent of cryptocurrency. He was now able to do stuff that he wouldn't be able to afford otherwise, and the entire world had been opened up to him.

Along with his wife, Jennifer, Gerry became an avid traveler, visiting dozens of countries over a two- or three-year period. He also began flying airplanes, buying his own brand-new Cessna 400, valued at around half-a-million dollars. In 2018, he even began working towards a helicopter license, but seems to have begun to lose interest in flying throughout the year.

Gerry also owned a boat: a 51-foot yacht, called "The Gulliver," but it isn't believed that he sailed much (if at all). To many, it seems like Gerry enjoyed the possibility of these activities more than the activities themselves; and Quadriga allowed him to pay for all of these investments in his personal life.

A man named Eric Schletz, who had gotten to know Gerry through a Nova Scotia flying club, said about the Quadriga founder:

"The guy had more money than he knew what to do with. I've seen Gerry walk through an airport with $50,000 in cash. That's the scale of money the guy had. He was a very reasonable person. But if he was going to spend the money, he was going to buy something nice."

However, in addition to the glitz and the glamour that came with his newfound wealth, Gerald had also been struggling with Crohn's Disease behind-the-scenes. He had been diagnosed with the disorder when he was 24 years old (at around the same time he founded Quadriga), and the affliction required thousands of dollars worth of medications each month to stay up on.

In November of 2018, Gerry and his new wife, Jennifer, prepared to take a trip to India. The trip - which was billed as equal parts honeymoon and humanitarian trip - was built around the couple visiting an orphanage they had helped fund in the preceding months. However, they made sure to plan stops around tourist attractions like the Taj Mahal, and seemed prepared for a lengthy stay: building an itinerary that would last at least a couple of weeks.

Before they left, though, Gerald Cotten made sure to refresh and sign his will (despite him being incredibly young and relatively healthy). Perhaps he was just overly-prepared for the worst case scenario, but he left most of his assets due to his new wife, Jennifer, naming her the trustee to his entire estate: an estate that included an airplane, a sailboat, a couple of pricey vehicles, and a handful of real estate holdings in British Columbia and Nova Scotia.

This will was so exhaustive that it even set aside $100,000 for a trust fund to take for the couple's two chihuahuas, Nitro and Gully, in case of their untimely deaths.

Just days after signing and filing this will, Gerald Cotten and his wife Jennifer Robertson set off for India.

Gerald Cotten and Jennifer Robertson arrived in New Delhi, India on November 30th, 2018. There, they planned to begin celebrating their honeymoon, while also participate in the opening of an Angel House orphanage they had sponsored.

The couple had been in India for a little over a week when trouble began to strike.

They had arrived in Jaipur, India on December 8th, and planned to spend four nights in the city. They were staying at one of the nicest resorts in all of India, where they checked in at around 6:10 PM (local time). Shortly thereafter, Gerry began to feel unwell. A doctor from the hotel saw Gerry and attempted to treat him, but cautioned the couple that he could not do much.

That evening, 30-year old Gerald was rushed to the Fortis Escorts Hospital. It seemed like he was suffering a major setback in his fight against Crohn's Disease, and - upon his admittance - was diagnosed with septic shock, perforation, and intestinal obstruction. He was in an incredible amount of pain and discomfort, and was struggling with both repeated vomiting and diarrhea. Surprisingly, his vitals seemed to be good; both his blood pressure and pulse were normal.

He was given some antibiotics and allowed to say in a private room overnight, but during the next day, his situation took a turn for the worse. Dr. Jayant Sharma, one of the doctors treating him, stated that Gerry:

"... became restless and developed respiratory stress as well. We shifted him to the intensive-care unit immediately."

There, Gerry continued to rapidly deteriorate. Within just a couple of hours, he had fallen into cardiac arrest, and the hospital worked to stabilize him over the next few hours.

On December 9th, 2018, at around 7:26 PM, Gerald Cotten passed away at the age of 30. His cause of death was listed as sudden cardiac arrest stemming from a perforation, and blood tests revealed elevated levels of white blood cells, indicating sepsis.

Over the next couple of days, Gerry's widow - Jennifer Robertson - received a death certificate from the local municipality, as well as a "no objection certificate" from the local police, which allowed her to transport Jerry's remains back to Canada for burial. These were both necessary steps, which also involved an additional step in oversight to ensure that no foul-play was involved in the death. It has been rumored that Gerald Cotten's remains were cremated in India, but I have found no official confirmation of that fact, so take it with a huge grain of salt.

On December 12th, 2018 - three days after Gerald's death - Jennifer Robertson filed an official affidavit on behalf of Quadriga, which including a "Statement of Death" for Gerry. The affidavit stated that Quadriga had roughly 363,000 registered users and owed approximately $250 million in both cryptocurrency and cash to approximately 115,000 affected users. Unfortunately, it seemed like virtually all of the company's funds and assets were held in "cold storage" - making them inaccessible until further notice.

So, before I move forward in the story, I'm going to take just a tiny step back.

At this point, you may be wondering what, exactly, "cold storage" is. Well, even though I'm not the most well-versed in cryptocurrency jargon, let me attempt to explain it.

When it comes to cryptocurrency, there are two types of storage: hot wallet and cold wallet. Cryptocurrency runs off of a series of checks and balances, to ensure that things like Bitcoins aren't just copied (what we know as "double-spending," where the same online token can be spent two or more times over). Transactions are documented on a blockchain; which is really just a never-ending log that documents every single move or transaction, ensuring that this coin is here and that coin is there.

Does that make sense? Think of the blockchain as a large spreadsheet that everyone has access to, where you can see who has what. Everything is kept anonymous, but you can verify the existence of each and every piece of cryptocurrency: such as Bitcoin, a Litecoin, etc.

Instead of bank accounts, cryptocurrency is held in addresses: which are, in essence, a folder of your choosing. This is where hot and cold wallets come into play.

If you were to keep your Bitcoins, for example, in a hot wallet, you would keep it in a Bitcoin address, which is connected to the internet at all times. This is Bitcoin that you can use at any given moment to pay for something, send to a friend of yours, etc. You could go online and actively monitor the existence of this Bitcoin, and make sure that it had not moved or gone anywhere.

Think of a hot wallet as a bank account, which you can check online, move money around, deposit or withdraw, etc. It's easily-accessible, but also more easily-accessible to others. More often than not, whenever cryptocurrency is stolen, it is stolen through hot wallets. Because of this risk, some choose to keep their crypto in cold wallets.

Using the same example as last time, Bitcoin... in this case, you would keep your Bitcoin in a cold wallet, which could be any kind of storage, whether it be a hard drive, a thumb drive, etc. Anything like that. You could move your cryptocurrency there temporarily to ensure its security, as it would feasibly only be accessible by you: as in, it is not connected to the internet, and is held behind a physical and password-protected firewall.

Cryptocurrency held in cold storage is not accessible by anyone through the internet, thus making it far more secure. However, there are a different set of drawbacks to cold storage, which may include losing access to the cold storage device, accidentally damaging it, etc. There are a number of horror stories of people losing untold riches from cryptocurrency held on cold storage, including a man who lost millions of dollars worth of Bitcoin on a hard drive he threw away years ago.

So, in essence, think of a hot wallet as money in your bank account, and your cold wallet as cold-hard cash. When you have money in a cold wallet, you can carry some on you at all times, or stockpile all of it in your mattress. It's money that only you have access to, and nobody else can access it through digital methods.

Well, at the time of Gerald Cotten's untimely death, the Quadriga hot wallets only had around $682,000 (in U.S. dollars) worth of crypcurrencies in them. However, on the flip-side, it was estimated that more than a $130 million in cryptocurrency was now missing... or, at the very least, inaccessible to anyone still involved in Quadriga.

Following the death of its CEO and founder, QuadrigaCX continued running as if nothing had changed. The exchange would continue to accept deposits for more than a month without telling anyone that the company's boss had passed away while visiting India.

For weeks, customers were unable to obtain money from the exchange, leading to concerns that the company was running low on cash - or, perhaps, was becoming insolvent.

Behind-the-scenes, Gerald's widow Jennifer Robertson had assembled what remained of the board of directors upon her return to Canada to try and figure out a path forward. She had been named the trustee of his estate, so it was her responsible to try and settle whatever matters he had at Quadriga. That was when it became crystal clear that the company was virtually just Gerry and whatever work he had done on his laptop; none of the other directors had been involved with the company since 2016, and - other than a few contractors that had been hired by Gerald to perform tasks here and there - there were no real employees.

Jennifer tried to figure out how to access the company's funds to pay out clients and customers, but - other than the less than $1 million held in the company's hot wallets and approximately $70 million in cash - there was no way to pay out everyone.

Jennifer claims that she attempted to access Gerald's devices, in the hopes of locating a cold wallet with more of the company's assets, but would be unsuccessful. In an affidavit, she claims that she even hired a hacker to try and do the same, but - likewise - those efforts were fruitless.

On January 14th, 2019 - more than a month after Gerald's death - an announcement was finally made on Quadriga's website and social media pages. The announcement was made by Gerald's widow, Jennifer Robertson, and explained how the CEO had passed away while doing charity work in India.

As you can imagine, this raised a number of issues - among not only Quadriga's clients, who had hundreds, thousands, or even millions of dollars invested in cryptocurrency through the exchange - but among authorities, who began poking around in the inner-workings of the cryptocurrency exchange.

Despite this announcement, QuadrigaCX continued to accept deposits for the next two or so weeks, until January 26th; meaning that there was still money coming into the company, but very little (if anything) being paid out. Shortly thereafter, on January 28th, the website was put into maintenance mode, as worried customers began wondering what was next for the largest crypto exchange in Canada.

On January 31st, 2019, the announcement was made that Quadriga had filed for creditor protection - which is just a step or so away from declaring bankruptcy. This meant that the company didn't have a solid plan to move forward and pay out the money it owed, but would open up the company's records for an outside agency to come in and look over the books.

Gerald's widow, Jennifer Robertson, claimed in her court filing that the company did not have the money necessary to pay out its customers. In a sworn statement, Robertson claimed that most of the company's assets were held in cold storage wallets that only her deceased husband would have had access to. However, she also claimed that the 2018 issue with the CIBC - which had resulted in more than $25 million in Quadriga assets being frozen - had impacted the company's bottom line.

"The litigation with CIBC had a significant impact on Quadriga's ability to operate and to ensure users of the Quadriga platform were kept whole. Gerry told me that he was advancing his own personal funds in order to ensure that payments were being made to Quadriga users."

Robertson also claimed that whatever money Quadriga held in cold storage was out of her grasp, having been held behind a firewall that she did not have the necessary passwords to acquire.

"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."

On February 5th, 2019, Ernst & Young - a large mutlinational company - was appointed as the independent monitor for Quadriga.

Quadriga had been granted temporary legal protection from creditors, under the Companies' Creditors Arrangement Act (a form of bankruptcy). Ernst & Young were tasked with going through the company's records, from bottom to top, and determining what assets Quadriga owned/possessed and figuring out a way to get them into the proper hands.

Prior to their appointment as Quadriga's independent monitor, it had been revealed that Quadriga did not have a bank account - or a formal accounting system of any kind. Rather, it had been relying upon third party payment processors, which juggled around the confusing finances. It was also reported that Quadriga had been run entirely from CEO Gerald Cotten's encrypted laptop from his home in Nova Scotia, despite customers in both British Columbia and Toronto believing that he was a local.

Interested parties began going through Gerald's numerous devices, including two active laptops, two older laptops, two active cell phones, two older cell phones, and a handful of fully-encrypted USB keys. They were searching for any sign of a cold wallet storage system, and actually were able to find several such devices belonging to Quadriga or CEO Gerald Cotten. Unfortunately, all of these addresses were empty - none of them having contained cryptocurrency since April of 2018.

At least one other cold wallet "appears to have been used to receive Bitcoin from another cryptocurrency exchange account and subsequently transfer Bitcoin to the Quadriga hot wallet" on December 3rd.

It is believed that at least three more cold wallets belonging to Quadriga were found in the subsequent searches, but - like the prior examples - all of them were empty. Whatever money Gerald Cotten had turned into cryptocurrency, there was very little trace of it in the records he left behind.

In a pre-filing report, Ernst & Young claimed:

"With Mr. Cotten's passing, Quadriga did not have the proper governance to manage the business."

Following the death of Gerald Cotten - and his company, Quadriga, filing for creditor protection - several of his former-customers found themselves left in the cold.

Elvis Cavalic, a Calgary man, was one of Quadriga's many hundreds of thousands of customers. He had used Quadriga to stockpile Bitcoin in the years prior, having made the decision to hold onto them for the time being. When the time came for him to withdraw the cash value of the cryptocurrency - roughly $15,000 worth - he only realized after-the-fact that he was never going to get them out of the crypto exchange he had trusted since 2016.

Cavalic put in his withdrawal request in November of 2018, and would not find out until January 2019 that CEO Gerald Cotten had passed away; who had seemingly taken with him the cold wallet reserves needed to pay out customers. Thankfully, Cavalic had only invested $500 or $600 worth of his own money in crypto, but there were several others that were much worse off than him.

Xitong Zou was another user of Quadriga, who had moved from the U.S. to Canada over the last couple of years. When he moved - instead of putting his money into an actual bank or money exchange, where they would have a number of fees associated with the transfer - he decided to move his life savings into the Quadriga cryptocurrency exchange.

Zou had put roughly $420,000 U.S. dollars of his own money into Quadriga - as well as a couple of large bank loans he had invested in cryptocurrencies through the exchange - for a total of more than half-a-million dollars. When the time came to withdraw this money, however, he was told repeatedly by Quadriga that due to their ongoing issues with the CIBC - which had frozen roughly $28 million in Quadriga assets - that he would just have to wait.

Well, then the news broke that Quadriga CEO Gerald Cotten was dead.

Shortly thereafter, Xitong Zou took to Youtube to explain what, exactly, had led him to lose more than $500,000 in Quadriga.

The belief that QuadrigaCX is a Ponzi scheme of sorts is only a rumor/allegation at this time, but is a major theory that has been spread over the last couple of months as this story unfolds in real-time.

In case you're unaware of what, exactly, a Ponzi scheme is... it's a pyramid scheme, where someone uses future investments to pay out prior investments. A lot of times, Ponzi schemes are run by people who borrow money from investors with the promise of good returns, but only ever pay out former investors with the new investor's money. It's a fraudulent tactic often used to lure in more and more investors, and perpetuate a scheme until it reaches the point of no return.

When it comes to QuadrigaCX, the belief that it might have been some sort of illicit Ponzi scheme is based on analysis performed by people familiar with cryptocurrency blockchains - which are the big, open ledgers that all crypto transactions are documented on. Blockchain analysts have looked for evidence of there being any hidden money in any of the accounts owned by either Quadriga or Gerald Cotten... and have been unable to find any record of the missing amounts. This has led to the belief that - if the cold storage wallets ever did exist - they have likely been "laundered" several times other into other accounts.

It is possible that QuadrigaCX was using current and future investments in their exchange to cover past debts, which explains why the company seemingly very little in the way of cash reserves (or any kind of financial backup). At least, nothing to the tune of $250 million, which was expected to be needed to pay out the rest of their users.

It's also possible that this is why Quadriga continued to accept deposits and process orders well into January of 2019, more than a month after the death of CEO Gerald Cotten; even when many of the customers that tried to withdraw their cash or cryptocurrency were told that they could not.

James Edwards, a cryptocurrency analyst, publishes his research on a blog titled "Zerononcense." After the Quadriga story broke, he spent some time digging through all of Quadriga's known accounts and wallets, tracing each visible transaction over a period of months. In February, he posted a brief summary of his findings, which follows:

"1.) It appears that there are no identifiable cold wallet reserves for QuadrigaCX.

"2.) It appears that QuadrigaCX was using deposits from their customers to pay other customers once they requested their withdrawal.

"3.) It does not appear that QuadrigaCX has lost access to their Bitcoin holdings.

"4.) It appears the number of bitcoins in QuadrigaCX's possession are substantially less than what was reported in Jennifer Robertson's (wife of allegedly deceased CEO and Owner Gerry Cotten) affidavit, submitted to the Canadian courts on January 31st, 2019.

"5.) At least some of the delays in delivery crypto withdrawals to customers were due to the fact that QuadrigaCX simply did not have the funds on hand at the time. In some cases, QuadrigaCX was forced to wait for enough customer deposits to be made on the exchange before processing crypto withdrawal requests by their customers.

"6. After completing the analysis, it is the author's opinion that QuadrigaCX has not been truthful with regards to their inability to access the funds needed to honor customer withdrawal requests. In fact, it is almost impossible to believe that this is the case in lieu of the empirical evidence provided by the blockchain."

James Edwards spoke to journalists with the Wall Street Journal, and expanded upon several of his points.

"None of the withdrawal addresses provided by customers led to a wallet that could be considered anything comparable to a reserve wallet."

The largest wallet that Edwards could find was the QuadrigaCX hot wallet, which had less than $1 million in cryptocurrency value attached to it. The others had significantly less, and were only tied to customer addresses and other Quadriga addresses of equal or lesser value. Nothing that matched up with the roughly $130 million in missing cryptocurrency that was estimated by Gerry's widow, Jennifer Robertson, in her Quadriga creditor protection paperwork.

James Edwards actually believes that Quadriga had been liquidating its assets for the better part of a year (since 2017 or so), perhaps siphoning value from its numerous accounts during that span.

Surprisingly, he is joined by a number of other cryptocurrency experts, who believe that QuadrigaCX was likely using future investments to pay out past debts - a business tactic commonly identified as a Ponzi scheme.

Taylor Monahan, the founder and CEO of MyCrypto, a digital wallet service, tweeted out the 3 main business wallet addresses for Quadriga. She pointed out that there seemed to be no evidence of Quadriga having any cold or reserve wallets for those addresses, and that - by most calculations - Quadriga was running on borrowed time.

Jesse Powell, the CEO of Kraken - another crypto exchange - tweeted out that his company knew of thousands of addresses linked to Quadriga in the past; none of which seemed to be linked to cold wallets or other reserve addresses. He even hinted at this being linked to borderline-criminal activity, welcoming any communication from law enforcement for his cooperation.

Max Galka, the CEO of Elementus, an analytics firms, stated in an interview with CBC News:

"So you know when looking on the blockchain to see whether what's there corroborates the story, you would expect to see funds moving out into a cold wallet. The fact that no cold wallets are present means that, yeah... it's not consistent with what they're saying."

In the months since news of QuadrigaCX founder Gerald Cotten's death, Jennifer Robertson - his widow - has become the target of numerous online attacks and conspiracy theories.

People involved in Quadriga and the overarching crypto-market believe that she is or was involved in some kind of scheme concocted by Cotten and/or herself; a scheme that is undoubtedly enticing, but primarily based on guesswork inspired on what little is known about Robertson herself. Online theorists have spent the past few months digging up information about Robertson, and dragging it into a public spotlight.

It was discovered that between May of 2016 and October of 2018, Robertson - along with Gerry - had purchases 16 properties in Nova Scotia. These properties ranged in value from $94,000 to $2.5 million, and 12 of these properties were held by Robertson's company: Robertson Nova Property Management Ltd. - a company that she is the president, secretary, and sole director for.

When Gerry died, Robertson also inherited other real estate holdings from his will, valued at more than $7.5 million. Following his death, she quickly moved to remove his name from all real estate holdings, moving them into separate trusts controlled wholly by herself; likely an attempt to protect them from future creditors coming after Quadriga's assets.

It was also discovered that Jennifer Robertson had not been born as "Jennifer Robertson." She had been named "Jennifer Forgeron" in 2016, when she began buying up these properties alongside Gerald, and seems to have changed her name to "Jennifer Griffith" at some point in the interim three years - before finally settling on "Jennifer Robertson." It is unknown why she changed her name, but that has not stopped online theorists from speculating.

Despite Jennifer Robertson claiming that she had no involvement in QuadrigaCX prior to her husband's death - insisting that Gerald ran the company all by himself, and their personal relationship didn't impede upon his work - that claim has been disputed by many of Quadriga's customers. These customers claimed that they had received money transfers from Robertson in the years prior to Gerald Cotten's death, going as far back as 2016 and 2017. Some of these customers provided deposit slips with inquisitive journalists, which show Robertson's company - Robertson Nova Property Management Ltd. - as the company making these deposits to Quadriga customers. This would blur the line between what Jennifer had filed in official affidavits, concerning her involvement in Quadriga, and what Quadriga customers allege is the truth.

There are a number of other theories concerning Robertson which I will not address, since a few seem to rely upon misogynistic insults and other troubling themes. However, Robertson remains a key component in the story of Quadriga, and I think her story is worth sharing.

Despite acting as the trustee for Gerald's estate, she continues to remain out of the public eye as intense scrutiny surrounds everyone involved in his or his company's orbit. Robertson continues to search for cold wallet funds somewhere in Gerald's belongings, but has not had success in finding any of them yet.

In addition to the belief that QuadrigaCX might have become a Ponzi scheme over time, some online believe that it might have been conceived as an exit scam of sorts.

An exit scam is a con where an established business continues receiving payments for new orders while stopping shipment of past or present orders. Because of the company's reputation, the scam is allowed to proceed for days - if not weeks or even months - before anyone starts to pick up on the scam itself.

Exit scams are likely familiar to anyone in the Bitcoin or crypto-community, as the admins of the online black market Evolution made off with close to $12 million in customers' Bitcoins back in 2015. They had continued receiving customer orders for some time, before the scam became public knowledge, but by then the damage had been done.

Some believe that Gerald Cotten had been planning a similar "exit scam" for months. In the months leading up to his death, he had been unable - or unwilling - to pay out many of Quadriga's customers. Then, he had updated his will just days before his death, and traveled to a part of the world where faking his death would be easier - or, at least, would require authorities to jump through more hoops to discover the truth. By the time that anyone knew what happened, he would have had at least a month to get a head start on a new life - with perhaps tens or hundreds of millions of dollars in assets in his possession.

At least, that's the crux of this theory.

Many who believe that QuadrigaCX was some kind of exit scam reason that Gerald Cotten seems to have been overly cautious when it came to his personal life: making sure to update his will just days before his death, and itemizing everything (including $100,000 set aside for his pet chihuahuas). On the flip-side, it seems like he was incredibly reckless with his business assets, leaving behind no financial statements as well as having no record for more than $100 million in cryptocurrency. The two different version of Gerald Cotten - one incredibly well-prepared, and the other lackadaisical - seem to stand in opposition to one another.

Of course, if we carry on this idea - that QuadrigaCX was an exit scam of sorts - then we get into the next step of this convoluted conspiracy theory: the theory that Gerald Cotten had somehow managed to fake his death while absconding with millions of dollars. Which - while enticing - seems to stretch the limits of believability... right?

When Gerald Cotten died, he had been in the city of Jaipur, India - a known tourist destination, but an area that is also known for all kinds of medical malpractices and frauds. Online theorists have pointed to dozens of insurance scams tied to Indian officials, who received payouts in order to fake documentation; sometimes, even providing fake death certificates for the right price.

Author Elizabeth Greenwood even published a book about these seedy dark markets, which are found predominantly in the Philippines and India. Her book, titled "Playing Dead: A Journey Through the World of Death Fraud," details how exactly people in the 21st century are able to hire doctors, administrators, and witnesses to fake their death for as little as $100.

When we begin to dive into the grimy details of Gerald's death, this theory starts to make more and more sense.

He died of Crohn's Disease, a disease that has a 3% risk of death with proper treatment - which, by all accounts, Cotten had. He was spending thousands of dollars each month on proper medication, and his Crohn's Disease - while a prevalent issue - didn't seem to cause him any serious setbacks in his life prior to this trip to India.

He had also updated his will just 12 days before his death, which - while not nefarious in any way - is certainly suspicious. Especially for a relatively-healthy 30-year old.

After Cotten's death, his body was handled by staff at the hotel he stayed at, instead of the local embalmer (who refused to receive the body due to a issue with local officials over the specifics). There also seem to exist discrepancies between the death certificates obtained by different journalistic entities; as different organizations seem to have received certificates with different times and addresses pertaining to Cotten's death. While minor, these issues seem to plague the overarching story of the Quadriga founder's mysterious death, and cloud how, exactly, he passed away.

Following his death, Cotten's remains were flown from India to Canada, and is is unknown if anyone in Canada actually observed his remains. Based on the foreign death certificate, it is possible that a simple "statement of death" was issued, and his remains were forwarded to a funeral home, where a closed-casket ceremony took place for friends and family. From there, it is believed that his remains were cremated, although I cannot find any official confirmation of that.

Nonetheless, the circumstances of Gerald Cotten's death remain a point of contention for the thousands of Quadriga customers that lost money through his crypto exchange. Online theorists continue to highlight every perceived flaw in the official narrative, and are quick to jump on any gaps in the story - including the actions of Cotten's widow, Jennifer Robertson, as well as the possibility of Cotten dying mysteriously while visiting overseas.

There continues to exist no real evidence of Gerald Cotten having faked his own death, despite the insistence of many in the crypto community. It's primarily a theory pushed by users on platforms such as Reddit and Twitter, and is perhaps a theory that is more intriguing than it is possible: while I do think anything is possible, I personal believe that the odds of him having been able to orchestrate this entire ordeal are infinitesimal, at best.

As skeptics and online theorists continued to poke around in the history of Quadriga, they found another enticing lead which came in the form of co-founder Michael Patryn.

I've only brought up Patryn's name twice this episode, right at the very beginning. He was involved in the founding of Quadriga along with Gerald Cotten back in 2013, but did not seem to be actively involved in the company. In fact, he has claimed that he left the company back in 2016, following a dispute with Cotten over whether or not to take Quadriga public.

When interested parties began looking into those involved with Quadriga, they soon stumbled upon the shady history of Gerald Cotten's founding partner... whose history seems just as shady as Gerald Cotten's mysterious end. In fact, it is widely-believed that this individual was born under a different name, and only changed his name to distance himself from prior legal trouble.

In 2003, upon entering adulthood, it seems like the young man named Omar Dhanani had begun operating under the alias of Omar Patryn. This is because he was involved with the website Shadowcrew, which was involved in all kinds of hacking attempts and trafficked in stolen credit card numbers and identities.

In 2004, the then-20-year-old Omar Dhanani/Omar Patryn was arrested by the U.S. Secret Service for operating an anonymous "electronic money-laundering service" - eventually pleading guilty to burglary and grand theft charges - and the following year (2005) was sentenced to 18 months in prison. His mugshot can still be found online, listed alongside his birth name "Omar Dhanani" (as well as his alias "Omar Patryn").

Following his release from prison in May of 2007, he was deported back to his nation of birth, Canada. The next year, 2008, he seems to have leaned fully into his alias, legally changing his name to Michael Patryn.

He didn't really pop up on the grid again until 2013, when he co-founded Quadriga alongside Gerald Cotten. He served on the company's board of directors for around two-and-a-half-years, until he left the company following a dispute with Gerald over the decision to list on the Canadian Securities Exchange. However, he remained one of Quadriga's main shareholders, and stayed in relatively good terms with Gerry afterwards. The two actually last communicated with one another via text in November of 2018 - shortly before Cotten was heading to India.

In the months since this story broke, many involved in the crypto community have begun digging into Patryn's past, and discovered not only his prior criminal convictions, but his two name changes. They also found a number of Reddit accounts linked to him, which linked him to other cryptocurrency exchanges despite still being a shareholder in Quadriga.

Patryn, meanwhile, has continued to deny any assertion that he is - or was, rather - the figures known as Omar Dhanani or Omar Patryn. Even when faced with composite images showing the near-identical appearance of the two men and himself, and the documented proof of his name changes, he continued to assert that he was only ever known as Michael Patryn.

In addition, Patryn continues to claim that he hasn't been actively involved with Quadriga since 2016, despite owning a majority stake in the company. He also denies any knowledge regarding Quadriga's missing funds, and asserts that he didn't know anything about Gerald Cotten's trip to India - or the inner workings of Quadriga - until after Gerry's death in December of 2018.

Quadriga seems to be a company that was run entirely by its founder and CEO, Gerald Cotten. At least, that's how it appears from the outside looking in: a company that only Gerry knew the inner-workings of, which was run entirely in his laptop and his mind. He is the only one that knew where the bodies are buried, so-to-speak, so trying to determine what kind of assets Quadriga had - without him being here - seems almost impossible.

More than $150 million in customer funds remains missing, closing in on half-a-year following Gerald's death. The amount is likely closer to $190 million (in U.S. dollars), if certain estimates are to be believed. Many of the alleged accounts belonging to Quadriga remain inaccessible to government regulators, commercial interests, possible creditors, and even Gerry's loved ones (who are forced to try and clean up the mess that his untimely death has left behind).

It is believed that this unknown amount - valued at upwards of $150 million - had been turned into cryptocurrency that has not been found in any hot or cold wallet reserves linked to Quadriga. It is basically gone, existing in the ether between solid and liquid currency, where not even cryptocurrency experts are able to determine what happened to it. None of the addresses linked to Gerry or Quadriga seem to provide any answers, which is exactly what the blockchain is meant to provide.

The fact that Quadriga can't finda any possible addresses where these millions upon millions of dollars might be, indicates that the money isn't where it's supposed to be... or it possibly never existed at all. It seems to be just as possible that Gerry left behind a hidden hard drive with thousands of crypto tokens... as it is that QuadrigaCX was a colossal scheme, which used future investments to pay out past customers.

Quadriga customers are still owed upwards of $250 million (in Canadian dollars), which is owed in both crypto and fiat currencies. It is believed that their remaining assets will be used to do so, but the customers that relied upon Quadriga's cryptocurrency exchange will receive far less than they paid in.

Quadriga is still being investigated by multiple parties - not only the aforementioned firm Ernst & Young, who were appointed as the company's independent monitor back in February - but by law enforcement agencies such as the FBI and the Royal Canadian Mounted Police. In addition, Jesse Powell - the CEO of U.S.-based Kraken, another crypto exchange - has offered up a $100,000 reward for any:

"...tip(s) that best lead to the discovery of the missing funds."

Powell wants to bring some credibility back to the cryptocurrency market, and believes that Gerald Cotten - on behalf of Quadriga - had moved his cryptocurrency around through other exchanges of his own. Until a full analysis is complete, it will be impossible to tell, but - for all intents and purposes - the money lost by Quadriga seems to have been lost for good. At least, for now.

More hearings for Quadriga's future are schedule for later this month, April of 2019, in which we will undoubtedly learn more about where the missing assets might have gone. We'll also learn more about the company's creditor protection process, and whether or not Quadriga will be forced to declare bankruptcy. With any luck, those that lost money through the exchange will be able to file a lawsuit and recoup their losses in the near-future.

In the months since this story began unfolding, many have pointed to the story of Quadriga as a worst case example of the volatile market of cryptocurrency. Many continue to believe that the market needs some kind of legislation or organization; perhaps even a government entity regulating the sale and distribution of cryptos... which, of course, others dispute, saying that doing so would eliminate the essence of cryptocurrencies, which were devised as an impartial third-party devoid of any governmental oversight. Nonetheless, the dispute continues, and many believe that the tragic fall of Quadriga might be the impetus needed for major reform.

Until further notice, the story of Quadriga remains unresolved.