Quadriga was founded in November of 2013 by Gerald Cotten, a graduate of Schulich School of Business, along with Michael Patryn(more on him later). Starting as a local trading service, they quickly created a website and began to establish themselves by doing approximately $7.4 million in trades in 2014.
By 2017 Quadriga had $1.2 billion CAD worth of BTC exchanged. That was also the first year they ‘lost’ a large sum of money, $14 million USD worth of Etherium due to a smart contract error. After that 2018 brought many reports of delays in withdrawals, customers having long response time on submitted tickets and inability to complete requests.
On January 14 Gerald Cotten was was announced dead by his wife Jennifer Robertson:
“It is with a heavy heart that we announce the sudden passing of Gerald Cotten, co-founder and CEO of QuadrigaCX. A visionary leader who transformed the lives of those around him, Gerry died due to complications with Crohn’s disease on December 9, 2018, while traveling in India, where he was opening an orphanage to provide a home and safe refuge for children in need.”
The suspicion twitter users and users of the exchange became justified on January 29th when the exchange suddenly goes offline. The website stated it was an unscheduled maintenance but an exit scam was suspected quickly.
January 31 Quadriga files for creditor protection stating “After Gerry’s death, Quadriga’s inventory of cryptocurrency has become unavailable and some of it may be lost.”
Gerald Cotten was the sole custodian of 26,500 Bitcoin, 11,000 Bitcoin Cash, 11,000 Bitcoin Cash SV, 25,000 Bitcoin Gold, around 430,000 ETH, and 200,000 Litecoin. The official story Quadriga put out was knowledge of the location of the private keys were lost with Cotten. Value of the lost currency at that time was $190 million USD.
Twitter and Kraken immediately went to work tracing the addresses of Quadriga’s hot wallets and soon determined Quadriga still has full possession and control of the wallets in question.
On February 5 we have Quadriga’s court hearing, granting it 30 days for a restructure and protection from creditors that wish to collect. On the same day Michael Patryn, Quadriga cofounder and partner of Gerald Cotten was found to be Omar Dhanani. Dhanani was reportedly sentenced to 18 months in the U.S. federal prison for being involved in identity theft related to both bank and credit card fraud back in 2005. According to Bloomberg, 22-year-old Dhanani pleaded guilty to operating Shadowcrew.com in 2002, a marketplace that trafficked over 1.5 million stolen credit card and bank card numbers.
On March 5 the court justice extended the protection to April 23. Quadriga’s customers are currently owed $260 million CAD in various assets, with a approx. $25 million disbursement fund planned.