Digital-asset exchange Quadriga CX has a $200 million problem with no obvious solution — just the latest cautionary tale in the unregulated world of cryptocurrencies.
The online startup can’t retrieve about C$190 million ($145 million) in Bitcoin, Litecoin, Ether and other digital tokens held for its customers, according to court documents filed Jan. 31 in Halifax, Nova Scotia. Nor can Vancouver-based Quadriga CX pay the C$70 million in cash they’re owed.
Access to Quadriga CX’s digital “wallets” — an application that stores the keys to send and receive cryptocurrencies — appears to have been lost with the passing of Quadriga CX Chief Executive Officer Gerald Cotten, who died Dec. 9 in India from complications of Crohn’s disease. He was 30.
Cotten was always conscious about security — the laptop, email addresses and messaging system he used to run the 5-year-old business were encrypted, according to an affidavit from his widow, Jennifer Robertson.
He took sole responsibility for the handling of funds and coins and the banking and accounting side of the business and, to avoid being hacked, moved the “majority” of digital coins into cold storage.
His security measures are understandable. Virtual currency exchanges suffered at least five major attacks last year.
Japan, home to some of the world’s most active digital-asset exchanges, has also hosted two of the biggest known crypto hacks: the Mt. Gox debacle of 2014 and the theft of nearly $500 million in digital tokens from Coincheck Inc. last January.