QuadrigaCX, the largest bitcoin exchange in Canada, has lost $ 190 million worth of cryptography after losing access to its cold storage pockets.
The announcement, filed on January 31 with the Nova Scotia Supreme Court, revealed a loss of $ 190 million in Bitcoin, Bitcoin Cash, Bitcoin Cash SV, Bitcoin Gold, Litecoin and Ethereum.
How did Bitcoin Exchange lose all its cryptographic funds?
Evidence first received by CoinDesk was presented by Jennifer Robertson, founder and CEO of QuadrigaCX Gerald Cotten.
According to the death certificate included in the oath, Cotten died in India after Crohn's disease. Gerald Cotten's death was revealed by an exchange in early January.
Jennifer Robertson pointed out that Cotten only controlled the storage of user funds in cold storage pockets. In cryptography, cold storage refers to a wallet that is not connected to the Internet and saved offline.
Typically, major digital asset exchanges, such as Binance and Coinbase, store a large portion of their funds in cold stores to prevent hacking attacks and security breaches.
However, there is often an infrastructure that is in the form of a multi-signature system to ensure that the exchange can still withdraw funds under the most reliable conditions.
In the case of QuadrigaCX, the founder and chief executive was solely responsible for overseeing the funds, and no one had access to the previous funds since his death.
“The usual procedure was that [QuadrigaCX founder and CEO Gerald Cotten] could move most of the coins to the freezer as a way to protect the coins from hacking or other virtual theft, ”the statement confirms.
Robertson has accepted a consultant to try to decrypt the laptop used by Cotten to potentially access private keys in cold storage pockets that hold the tools of QuadricaCX users.
The consultant has not found any success in accessing the laptop, and so far the exchange has failed to recover the lost funds.
What happens if Exchange can't recover funds?
On February 1, CCN reported that QuadrigaCX had been struggling to recover funds stored in cryptographic purses, as well as money kept by a third party.
"Over the past few weeks, we have worked extensively to address our liquidity issues, which include trying to find and secure our very important cryptocurrency reserves, stored in cold pockets, and needed to meet customers' cryptocurrency balances on deposits, as well as the purchase of a financial institution. accept bank transfers that will be passed on to us. Unfortunately, these efforts have not been successful, ”said the company.
Currently, the Exchange has requested a halt in proceedings that protects the company from possible litigation that may be initiated if investors can file an application on the platform.
If a company is unable to recoup the funds of its users, Robertson said in a statement that the company is considering selling the company to compensate users for purchasing capital. The Exchange has already received several offers.
"[QuadrigaCX] there is an urgent need for a stay of proceedings that will allow Quadriga and its contractors extra time to find any cryptocurrency stocks, as well as discuss Quadriga's available bank projects, ”the statement said.
QuadrigaCX faced a series of unsuccessful events that left the company with a limited range of decisions to protect its investors.
However, the system used by the exchange allowed one operator to fully control user funds, lost hundreds of millions of dollars and could be prevented by a well-structured internal management system.
As CoinShares Chief Strategy Officer Meltem Demirors saidit is important that large-scale cryptographic exchange has proper continuity planning.
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