Key Takeaways

• QuadrigaCX filed for bankruptcy in 2019 after its CEO Gerald Cotten died in mysterious and sudden circumstances
• Cotten was claimed to be the only one with access to cold wallets containing funds
• Cotten was later revealed to have been scamming customers, with QuadrigaCX a Ponzi scheme
• Over 100 BTC were transferred mistakenly to a wallet in 2019 after the bankruptcy filing, with bankruptcy trustee EY stating the funds were now lost as nobody had access
• This weekend, the wallets woke again, with funds transferred to a crypto mixing service

Sleeping bitcoin wallets belonging to controversial exchange (no, not that one) QuadrigaCX woke up this weekend. Over 100 bitcoins tied to the defunct exchange moved out of cold wallets that until now, were thought to wallets which nobody could access.

QuadrigaCX, for anyone unfamiliar, is the exchange founded by Gerald Cotten and the subject of the captivating Netflix drama “Trust No One: The Hunt for the Crypto King”. It was one of the early mainstream exchanges, handling over 80% of Canadian Bitcoin volume at one point. Only thing was, it was all a scam.

What happened QuadrigaCX?

It filed for bankruptcy in 2019 with close to $200 million being owed to customers. It was later revealed to be a Ponzi scheme, with Cotten opening accounts under aliases and crediting himself with fictitious balances, which he then traded against unsuspecting customers. He was living a double life the entire time, and the exchange was nothing but a front for an old-fashioned Ponzi scheme.

Big four company Ernest and Young (EY) is the bankruptcy trustee, and provided an extra layer of intrigue when it reported that the company mistakenly sent 100 bitcoins to a wallet it could not access.

“On February 6, 2019, Quadriga inadvertently transferred 103 bitcoins…to Quadriga cold wallets which the Company is currently unable to access. The Monitor is working with Management to retrieve this cryptocurrency from the various cold wallets, if possible.”

CEO dies in mysterious circumstances

The reason this wallet was inaccessible, of course, is because CEO Cotten died in mysterious circumstances while travelling, spawning a million conspiracy theories. He was apparently the only one who had the keys to the offline wallets containing the crypto, which is why so many accused him of faking his own death. 

This weekend, the cold wallet which received those 100 BTC in 2019 suddenly became active again. It sent 36 BTC from this wallet and 33 BTC from this wallet, which were two of the largest transactions. But more so than the amount, the destination is interesting – the coins were sent to the mixing service Wasabi, a crypto mixing service, which acts to obfuscate the source and destination of crypto funds. 

What does it mean?

So, is Gerald Cotten alive and well, and digging into his bitcoin savings? 

Magdalena Gronowska, a bankruptcy inspector and member of Quadriga’s creditor committee, said the funds were not moved by EY. And earlier reports by EY said that Cotten was the only one with access to the wallets.

Honestly, nobody knows. This is just another layer of mystery into a story which was already as bizarre, confusing and shady as could be. The only we know for certain is that Gerald Cotten was a fraud and QuadrigaCX was a scam, and now coins which supposedly only he had control over – that were assumed lost, therefore, considering he passed away –  are moving again. 

So, either Cotten is alive or somebody else has access to those wallets. But if the actor was legitimate, let me ask you this: why are they sending the funds to a mixing service?

QuadrigaCX, the defunct crypto exchange attributed to five Bitcoin wallets. The exchange has moved funds for the first time since bankruptcy.

The blockchain sleuth ZachXBT noted the movement of 104 BTC worth 1.75 million USD was transferred on 17 December. ZachXBT saw that 69 BTC, which is worth 1.16 million USD was transmitted from two of the addresses to the crypto mixing service Wasabi. It is typically used to obscure the transactional history of specific Bitcoins.

In 2019, after the bankruptcy of QuadrangaCX, the company EY, was appointed by the court to look after the case. It stated that the company had moved 469,000 USD (103 BTC) worth of Bitcoin at that time. The coins were moved to cold wallets which were inaccessible by the company. These active wallets are the same that were linked back then.

Also read: Bitcoin (BTC) Price Hits A New Monthly Low, Further 20% Decline Possible

Who moved the Bitcoins?

A member of the QuadrigaCX creditor committee, Magdalena Gronowska, while talking to CoinDesk claimed that the EY has no hand in moving the coins. Thus, the motive for moving these Bitcoins is still unclear. The EY is trying to recover these cryptos.

Once a leading crypto exchange in Canada, QuadrigaCX filed for bankruptcy in 2019. This happened three months after the strange death of its founder Gerald Cotten. Cotten was on a tour in India when he died, as said, because of an autoimmune health complication. Later, his widow claimed that she has no access to his business records or passwords. Back then, she told Bloomberg, that he always kept the keys to himself.

Customers also claimed that he had faked his own death to keep the investors’ money. Thousands of customers could never get back the money invested in the firm.

His death is still a mystery and earlier this year, Netflix came up with a series around him.