Bitcoin: Millions of dollars of cryptocurrency 'lost' after man dies with only password

Conspiracy theories have been raised about the whereabouts of the QuadrigaCX exchange's funds

Anthony Cuthbertson
Tuesday 05 February 2019 12:47 GMT
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The unexpected death of the owner of Canada's largest cryptocurrency exchange has left £145 million of cryptocurrency locked in a digital wallet to which he reportedly had the only password.

Gerald Cotten, who served as the chief executive of the QuadrigaCX exchange, died on 9 December in India due to complications relating to Crohn's disease, according to Canadian court documents filed by the company.

The Vancouver-based exchange claimed in a blog post that Mr Cotten's death means they are unable to pay customers around £41m in bitcoin and other cryptocurrencies that they're owed, prompting various conspiracy theories surrounding the whereabouts of the funds.

Some customers have even questioned the death of Mr Cotten, taking to social media platforms to demand proof in the form of an obituary or death certificate. According to Coindesk, a death certificate was included in the list of court documents.

Mr Cotton's wife, Jennifer Robertson, stated in an affidavit: "I do not know the password or recovery key. Despite repeated and dilligent searches, I have not been able to find them written down anywhere."

New research also raises questions about the true state of QuadrigaCX's cryptocurrency holdings, disputing claims made about the funds in the filings.

The funds were allegedly stored in so-called cold storage wallets, meaning they are not connected to the internet and accessible to only people who knew the private keys, or passwords.

This is standard practice for many cryptocurrency exchanges, as it helps to prevent hacking. However, other exchange operators say it is unusual for the keys to be held by just one person.

"Using a reputable custodian to hold the private keys outside the company is perhaps the best option to ensure these codes are not lost," Erik Wilgenhof Plante, the CCO at the exchange BeQuant, told The Independent.

"Following this news, there’s likely to be a large amount of scrutiny on Quadriga, in case someone does hold the private key and attempts to siphon the funds. There is a clear lesson here that having a single person owning this information creates a huge vulnerability; they are not only risking huge amounts of money being lost in the event of their death, but also pose a huge risk for kidnapping by people wishing to steal or use blackmail to obtain the coin.”

Millions of dollars worth of cryptocurrency appear to be locked in a cold storage wallet with no way of accessing them (Getty Images)

According to the summary of findings of the research done by cryptocurrency firm ZeroNonsense, "there are no identifiable cold wallet reserves for QuadrigaCX."

The report added: "It appears that QuadrigaCX was using deposits from their customers to pay other customers once they requested their withdrawal; It does not appear that QuadrigaCX has lost access to their bitcoin holdings. 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."

Other cryptocurrency experts have suggested such theories are being promoted by people hopeful the customers' funds can somehow be recovered.

In a message to customers, the QuadrigaCX board of directors said efforts were being made to unlock the cold storage wallets.

"For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us," the message stated.

"Unfortunately, these efforts have not been successful."

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