It was not your average exchange hack. This took on so many twists and turns; changing identities, a marriage, a last-minute will and the strange death of a person solely responsible for $190 million in assets. I am going to breakdown the heist of QuadrigaCX, Canada’s largest crypto exchange.

On January 14, Gerald Cotten, the 30-year-old co-founder and CEO of Canadian exchange, QuadrigaCX,  died suddenly, on honeymoon in India, according to reports. What is fishy about it all is he was the only person with access to $190 million of funds in cryptocurrencies and fiat money, the majority of funds stored on the exchange.

The immediate circumstances of dying in a place known for fake death certificates, from a disease that isn’t typically fatal (Chrones) to someone so young, were suspicious enough. What happened in the year leading up to the events of December and January makes the whole affair even more difficult to fathom. 

The exchange faced financial difficulties throughout the year and may have lost a considerable amount of users’ money. This was supported by the announcement that the funds may not even EXIST at all. The CEOs of crypto exchanges Kraken and Coinbase have also backed this view. Kraken has since offered a $100,000 bounty for information about the case which has caused 115,000 people to move on empty handed. Right now, Ernst and Young are continuing to search for the missing funds. The QuadrigaCX affair has only just begun.

In 2018, QuadrigaCX was in financial difficulty. Funds were being locked up and users were complaining. This was the beginning of a series of sketchy/questionable events for the Canadian crypto exchange. The main events to follow may be more shady than I expected. This is something to make a documentary about. 

QuadrigaCX, founded in 2013, was originally quite successful, quickly becoming the largest crypto exchange in Canada.

But things soon started spiraling downhill. In January, 2018, the Canadian Imperial Bank of Commerce (CIBC) froze $30 million of funds belonging to QuadrigaCX because it couldn’t identify the owners of the funds. Customer complaints were prevelant on QuadrigaCX as people struggled to access their funds. This led to fewer people using the exchange and its daily trading plummeted to $600,000 by October, 2018.

This is one of the main signs that the exchange did not have financial security. 

Not only was there a whole host of financial problems at QuadrigaCX that were neatly wrapped up when the CEO died, taking the “funds” with him but there were other odd factors surrounding his death.

Just two weeks prior, Cotten had changed his will leaving his personal property—worth $9.6 million— to his new wife, Jennifer Robertson. They had been together under two years. Despite the exchange’s financial difficulties, they managed to buy 16 properties together, plus their own plane. 

On December 8, 2018, QuadrigaCX CEO Gerald Cotten was admitted to the Fortis Escorts hospital, Jaipur, suffering from vomiting, watery stools and crampy abdominal pain. After his death he was transferred back to the hotel. Then his body was taken to an embalmer who refused to carry out such a treatment because the body had come from the hotel, not the hospital.

A second embalmer, a local medical school where they study cadavers, wasn’t so morally defined and took the job. A hotel employee delivered the body to them, according to the certificate issued at the embalming centre.

A death certificate was made. What happens next is laughable amongst a very suspicious turn of events. They MISSPELLED the CEO’s surname as “Cottan!”

The next day police issued Robertson a certificate stating that she could take the body home.

The funeral took place in Halifax, Canada, on December 12, and, from witness testimony obtained by the Kraken exchange (which is investigating the case), it was a closed casket. Imagine that!

All of this happened before it was revealed publicly the CEO had died which makes this EVEN more hard to fathom. 

Aside from Cotten and his widow, Robertson, the two other main people behind the scenes at the exchange were cofounder Michael Patryn and lead developer Alex Hanin.
Michaely Patryn, aka Omar Dhanani, aka OxSifu! This is where things tie to the reluctance to accept the negligence of Sesta and TIME. 
Patryn or whoever he actually is, is credited with founding Canada's first blockchain incubator, Fintech Ventures Group, and was an advisor to multiple crypto-related projects, before he met Cotten online, the same way he supposedly met Daniele Sestagalli,  and moved to Canada to start working on the exchange. 

According to a report by The Globe and Mail, Patryn might be the pseudonym of Omar Dhanani, a felon convicted of money-laundering-related charges for his role in a criminal organization known as “ShadowCrew.” Dhanani spent 18 months in prison for credit-card fraud.

Patryn has denied that he is Omar Dhanani. However, the Globe and Mail show a number of connections between the two persons, including a website called Midas Gold Exchange, which was owned by an “Omar Patryn” (the two names mixed together). You just can’t make this stuff up. 

There is also, reportedly, evidence that Patryn tried to hide this connection. Records show he hired Reputation, a Toronto-based company that removes online data about people. It then published made-up reports suggesting Patryn was a global speaker on blockchain technology and was a mixed martial artist. So perhaps, not even his hobbies are real.

It is unclear if Patryn was an active member of QuadrigaCX. According to a public statement, he left the exchange three years previous,Jesse Powell, CEO of the exchange Kraken,  thinks this is unlikely. Powell, who has been obsessed with the case since it first broke,  believes that after Patryn’s “true” identity was discovered, Patryn attempted to distance himself publicly from the company, while remaining active in the shadows.

Cotten suffered from Crohn’s disease. He was diagnosed at 24. The cause of his death was listed as sudden cardiac arrest, stemming from a perforation of the stomach. But there is disagreement over whether this complication is normal for someone with Crohn’s. Jesse Powell argues that it’s not.

“It seems pretty likely that he is dead,” said Powell, during a Kraken podcast. “However there was no autopsy performed so there’s speculation over how he developed this perforated stomach in the first place. It doesn’t seem like a usual thing for someone with Crohn’s to develop.”

However, Jayant Sharma, the doctor who treated him, stated that blood tests showed elevated levels of white blood cells, an indication of sepsis. He also said the body appeared to match photographs of Cotten. And Brian Feagan, a London doctor who specializes in Crohn’s says that Cotten’s rapid demise is consistent with what might happen to someone with Crohn’s disease who was suffering from septic shock.

But that's not enough for QuadrigaCX claimants who believe that there's a chance he may still be alive. According to Coindesk, law firm Miller Thomson has sent a letter to the Royal Canadian Mounted Police (RCMP), on behalf of the claimants, requesting for Cotten's body to be exhumed. Robertson's lawyer said she was "heartbroken to learn of this request."

So where is the $145 million?Shortly after the death was revealed, a statement was made that Cotten died as the only person with access to $190 million of funds, with $145 million of cryptocurrency supposedly “locked up” in a cold storage wallet which can’t be accessed. Which is all well and good, but these wallets are empty.

A March 1, 2019, a report by creditors Ernst and Young shows the cold storage wallets have just a few thousand dollars in them. It said that large amounts of funds passed through the cold wallets but were then sent to other accounts, including on other crypto exchanges. This means these funds may exist on other exchanges, but so far little progress has been made.

According to Kraken CEO, Jesse Powell, it is likely that the funds are held under fake names which makes it much harder for the exchanges to identify if they belong to QuadrigaCX.

One researcher known as “Zerononcense” claims to have found $100 million of QuadrigaCX’s funds through analyzing transactions on block explorers. But in an interview with Decrypt, Powell said he disagreed that the accounts belong to QuadrigaCX. He had looked at the ones mentioned on Kraken and found they were owned by other people.

This means the funds may be stored on an unknown exchange, under an unknown name. Or they don’t exist. Either way, Ernst and Young has its work cut out.

While the funds have not yet been found, there are a few plausible ideas why the sequence of events may have occurred. Let’s explore them next.

The main theory is that QuadrigaCX was in financial difficulty but there is also speculation that the exchange was used for money laundering. It’s also possible that the whole thing was simply poor management.

The most likely explanation of the missing funds is that they didn’t exist in the first place. In June 2017, QuadrigaCX suffered a multimillion dollar bug which locked up a lot of its Ethereum funds in smart contracts, when the Ethereum price was only $250. Coinbase CEO Brian Armstrong speculated on Twitter that the exchange tried to trade its way out of the jam.

Powell pointed out that the price of Ethereum jumped up to $1,300, drastically increasing the liability to $90 million. However, he did say, “It would be hard for them to lose everything, I’m still hopeful they could find money on some of the other exchanges.”

Armstrong suggested the team behind the exchange may have decided to use Cotten’s death to hide the fact these funds were missing which would explain the statement that he died as the only person with access to these funds—despite the funds not being in the cold storage.

Another possibility is that the exchange was involved in more nefarious work. If Patryn really was Omar Dhanani, then he had been previously involved a scheme that revolved around money laundering, known as Midas Gold Exchange (run by an Omar Patryn). This was shut down when Liberty Reserve was caught for money laundering.

“Definitely could be money laundering, based on some of the statements [Patryn] has made. He’s told people he’s a money laundering dream. QuadrigaCX was also doing cash withdrawals. I wouldn’t be surprised, given Patryn’s past.” Powell said, adding, “He might have even had the idea to start the exchange because it might be great for money laundering.”

It’s possible that the exchange was just understaffed and too many corners were cut. This could have resulted in bad management and a lack of accounting.

Running a crypto exchange is a complicated business that gets even more complicated the larger it is.

And in the end, if the failure of QuadrigaCX was due to mismanagement, this could be the most unsettling explanation of all.  There are an estimated 215 crypto exchanges around the world, handling billions of dollars invested by millions of people. Many of them exist outside any regulatory framework. Over 36 exchanges have already failed or been hacked or otherwise lost investors funds.

It’s not a question of whether another QuadrigaCX is going to happen. It’s simply a matter of time. 
Was TIME Patryn/Dhanani/OxSifu next target? Was Sesta involved more than we know and ZachXBT caught it early? Is TIME the next project on the list with QuadrigaCX? A lot of questions remain but one thing is for sure, something is not right. TIME will tell how this story ends. One thing is for sure, Crohns is not gonna get anyone out of this one. Maybe TIME is ticking on an even bigger story than anyone realizes!

Source:

MMA_Crypto