Over 100 bitcoins owned by collapsed crypto exchange QuadrigaCX have left wallets tied to the exchange, with the majority flowing through a privacy tool. That’s probably not good news.
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The story
QuadrigaCX is back in the news! For those of you who weren’t there at the time, a Canadian crypto exchange dramatically collapsed in January 2019 after its founder apparently died of complications from Crohn’s disease in India.
Why it matters
It turned out that the exchange owed thousands of customers around $200 million in crypto (at prices at the time). It later emerged that the exchange’s founder and CEO, Gerald Cotten, had misappropriated client funds for personal use. He also left little paperwork or records, making it difficult for investigators to actually verify what assets or liabilities Quadriga had… Sound familiar?
break them off
That’s ancient history by today’s standards. Ernst and Young, a Big Four auditor, acts as the company’s receiver and has spent much of the past 3+ years investigating Quadriga and trying to locate the company’s assets and recover as much of the funds as possible. Canada’s tax agency is also digging into Quadriga, reviewing taxes the exchange may not have filed when it was in operation.
Early on, in February 2019, EY announced that it had accidentally sent over 100 bitcoin (BTC) to Quadriga’s so-called cold wallets, which it did not have access to.
Last Friday someone pulled out all 104 BTC. And promptly moved at least 70 of them to Wasabi Wallet, a data protection service. EY confirmed that there was no one on the auditing team, meaning someone either had access to those wallets in the last four years or someone found the keys almost four years later. Either way, it’s another blow to the crypto exchange, which is still going through its bankruptcy process.
The story goes on
Crypto analytics firm Chainalysis said the movements are similar to those of Bitcoin, which left the wallets of defunct trading service BTC-e a few weeks ago.
This is of course not good news. EY and Miller Thomson, the law firm representing Quadriga creditors, did not respond to requests for comment earlier this week. In nearly identical statements, the two firms said they were investigating the “unauthorized transactions.”
A number of questions need to be answered. Why did EY believe the addresses in question were cold wallets, and what work have they done over the last four years to try and confirm they couldn’t find the keys?
Additionally, the case appears to be largely held up by Canada’s tax authorities at this time, but EY has not issued any reports on the bankruptcy case since January 2021, and the last notice to creditors was in February 2021. Crypto prices have changed dramatically since then, therefore it is unclear what exactly the creditors will get back.
More FTX news
Sam Bankman-Fried is now in the United States after being extradited from the Bahamas on Wednesday, just over a week after Bahamas police arrested him.
While he was on the air, U.S. Attorney Damian Williams announced that former Bankman-Fried associates – Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang – had pleaded guilty to various charges and were working with prosecutors cooperated. The Securities and Exchange Commission and Commodity Futures Trading Commission added charges of their own, similar to their case against Bankman-Fried.
Read the reports from the past few days here:
Bankman-Fried is scheduled to appear in court in New York on Thursday. Keep an eye on CoinDesk for updates as they come.
The US Senate has confirmed incumbent chairman of the Federal Deposit Insurance Corporation, Martin Grünberg, to a full term as head of the agency.
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(New York Magazine) New York Magazine profiled a small crypto news outlet that ran a story about an exchange last month.
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(Techdirt) Twitter has been a mess lately. CEO Elon Musk banned several journalists under questionable pretexts after banning a flight tracking account under seemingly false pretenses, made a show of unbanning them without actually doing so, and changed several policies in a very short space of time. Also, I’m on Mastodon now.
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(Politico) I haven’t actually followed this case very closely, but a case involving ConsenSys AG in Switzerland is, in Politico’s words, “heated up”.
If you have any thoughts or questions on what I should cover next week, or any other feedback you’d like to share, feel free to email me at [email protected] or find me on Twitter at @nikhileshde.
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Until next week!
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