Cryptocurrency exchange loses $145 million after CEO takes passwords to the grave

Cryptocurrency exchange loses $145 million after CEO takes passwords to the grave

About $190m in cryptocurrency has been locked away in a online black hole after the founder of a currency exchange died, apparently taking his encrypted access to their money with him. 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.

Gerald Cotten, the 30-year-old founder of QuadrigaCX, died due to complications with Crohn's disease, according to Sky News, citing Cotten's wife, Jennifer Robertson.

"Cold storage", for the uninitiated, refers to offline wallets used to safely store large amounts of cryptocurency (connected, or "hot", wallets are more vulnerable to hackers).

Back to the present day, and Cotten's widow has been having to fend off questions of legitimacy surrounding the death all the while trying to follow up with security experts on how to gain access to the large sum of crypto - now behind nearly entirely insurmountable encryption.

Cryptocurrency exchanges such as QuadrigaCX operate as quasi-banks and have none of the safeguards of regular banks. No conclusive figures could be pinned, but the researcher also divulged that Quadriga enlisted the use of fractional reserves to service its customers, using client deposits to issue withdrawals.

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A statement from QuadrigaCX's board of directors said: 'For the past weeks, we have worked extensively to address our liquidity issues.

The company hired an investigator to see if any information could be retrieved but ongoing efforts have had only "limited success in recovering a few coins" and some information from Cotten's computer and phone.

If the firm is successful in obtaining credit protection, account holders could reportedly lose their ability to sue the company for compensation.

In a statement posted on its website on January 31, QuadrigaCX said that it applied for creditor protection in the Nova Scotia Supreme Court "to allow us the opportunity to address the significant financial issues that have affected our ability to serve our customers".

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