Cryptocurrency firm loses $145 million after CEO dies with 'cold wallet' password

The largest bitcoin exchange in Canada, QuadrigaCX has claimed to have gone astray of CAD 190 million (nearly USD 145 million) worth of cryptocurrency after the exchange lost access to its cold (offline) storage wallets. Unfortunately, the only person with access to the company’s cold wallet, founder and chief executive officer QuadrigaCX, Gerald Cotten is dead.

After the death of founder and chief executive officer QuadrigaCX, the Canadian exchange this week filed for legal protection from creditors in the Nova Scotia Supreme Court until it locates and secures access to the lost funds. In an undertaken affidavit filed by Cotten's widow Jennifer Robertson and obtained by Coindesk, Robertson said QuadrigaCX owes its customers some CAD 260 million (USD 198 Million) in both cryptocurrencies, including Bitcoin, Bitcoin Cash, Litecoin, and Ethereum, as well as fiat money.

However, Robertson said the cryptocurrency exchange only has smaller amount in a 'hot wallet' (USD 286,000), claiming that to protect its users funds from hackers, majority of coins were kept in a 'cold wallet'— a physical device that is not connected to the internet—by Cotten, who died of Crohn's disease on December 9 in Jaipur, India.

According to the affidavit, the exchange's offline wallet holds roughly -

26,500 Bitcoin (USD 92.3 million)

11,000 Bitcoin Cash (USD 1.3 million)

11,000 Bitcoin Cash SV (USD 707,000)

35,000 Bitcoin Gold (USD 352,000)

200,000 Litecoin (USD 6.5 million)

430,000 Ether (USD 46 million)

Cotten was the only person who had the private keys to the wallet, according to Robertson, and no other members of the team, including herself, has the password to decrypt it.

Is it an Exit Scam?

Researchers believe QuadrigaCX never had $100 Million. Some users and researchers have been doubtful of the exchange's claims, with a leading cryptocurrency researcher, claiming that QuadrigaCX never had access to such a pool of funds and probably lying about having cold wallet reserves, suggesting the incident could be an exit scam.

Crypto Medication, a researcher and data analyzer, performed in-depth blockchain analysis of the QuadrigaCX's Bitcoin Holdings by examining TX IDs, addresses, and coin movements, and concluded that "there is no identifiable cold wallet reserves for QuadrigaCX."

Some other people are also reporting that moving some of the funds in question after the case was publicized and the strange circumstances of Cotten's death suggest that his death is either faked or is a pretext for an exit scam by parties with access to the funds, according to CCN.

A bankruptcy hearing for the cryptocurrency exchange is scheduled for February 5 at Nova Scotia Supreme Court, with international accounting firm Ernst and Young Inc. to be appointed as an independent monitor.

However, if the exchange has indeed placed its cryptocurrency in a now-inaccessible physical device, it is likely that thousands of its users would never be able to recover their funds and investments.