Crypto exchange CEO death mystery deepens as wife inherits assets

Cryptocurrency Representational image | Reuters

While conspiracy theories about the mysterious circumstances surrounding the death of cryptocurrency exchange Quadriga CX's CEO Gerald Cotten are doing the rounds on social media, a Bloomberg report on Wednesday states that he "left all his assets to his wife and made her the executor to his estate" as per his will and testament on November 27, 2018. The exchange founder’s will outlines numerous assets, including several properties in Kelowna, British Columbia and in Nova Scotia, an airplane, a Jeanneau 51 yacht and his pet chihuahuas, Nitro and Gully.

According to a post dated January 14 on Quadriga CX's Facebook page, Cotten died from complications with Crohn’s disease on December 9, 2018, in Jaipur, where he was opening an orphanage. About $137.21 million equivalent in cryptocurrencies—C$180 million—have been frozen in the user accounts of the exchange after Cotten's death since he was the only person who had access to the accounts. The Vancouver-based platform also failed to pay the C$70 million in cash to those clients.

The company’s inability to release its clients’ money has created an uproar among the investors and raised suspicions over the death of Cotten.

The platform, which allows the trading of Bitcoin, Litecoin and Ethereum, filed for creditor protection in the Nova Scotia Supreme Court last week. Quadriga CX, which went offline on January 28, had 3,63,000 registered users and owes a total of C$250 million to 1,15,000 affected users at the time of shutdown, according to the affidavit filed by Cotten’s widow Jennifer Robertson on behalf of the company.

According to the affidavit, Cotten took sole responsibility for the handling of funds and coins, and the banking and accounting side of the business. To avoid being hacked, he moved a "majority" of digital coins into what’s known as cold wallet, or unconnected to the internet, like USB sticks. Robertson wrote in the affidavit that after her husband’s death, his employees tried to get into the cold wallets but failed or found only small amounts of money.

Quadriga CX's case appears to be the first one where the clients have actually lost the keys to their accounts, even though many other crypto exchanges have lost their investors' money earlier.

Questions have been raised in social media circles on why a chief executive would be the only point of access to such a vast sum of investors' money. Also there are reports stating various online sleuths, who had been searching the blockchain—a ledger that can be updated by decentralised networks—for evidence of where Quadriga CX had stored its assets, but had failed to find any, which raised serious concerns. One among the many conspiracy theories surrounding Cotten's death states that he is faking his death as part of an exit scam.

Meanwhile, experts are divided over the need for regulation in the digital currency space. While some experts suggest that cases like Quadriga CX highlights the need for regulation of crypto exchanges, which must comply with laws regarding money laundering and terror financing, some others say that regulations would stifle innovation as cryptocurrencies and its underlying blockchain technology are still evolving.