Quadriga’s Fraud is Surfacing as Founder Moved Customers’ Funds in his Personal Account

  • Ernst & Young report: Quadriga late founder Gerald Cotten created fake accounts
  • Over $200 million stolen from customers, 9,450 BTC, 387,738 ETH, and 239,020 LTC
  • QuadrigaCX’s late founder and CEO moved the funds of users to his own account on other cryptocurrency exchanges, according to the fifth report by Ernst & Young.

In a 70-day page report released Wednesday, one of the big four accounting firms claimed that Gerald Cotten, who died last December transferred millions of dollars in cryptocurrency out of customer accounts into others exchanges. These funds were used by Cotten to furnish his trading habits and personal lifestyle.

Cotten, it appears stole more than $200 million from his customers.

“Significant volumes of Cryptocurrency were transferred off Platform outside Quadriga to competitor exchanges into personal accounts controlled by Mr. Cotten,” the report said. “It appears that User Cryptocurrency was traded on these exchanges and in some circumstances used as security for a margin trading account established by Mr. Cotten.”

Fake Accounts, Poor Practices, Mismanagement

Cotten reportedly created fake accounts on Quadriga under multiple aliases and credited them with fake fiat that did not exist. This resulted in:

“inflated revenue figures, artificial trades with Users and ultimately the withdrawal of Cryptocurrency deposited by Users.”

EY further noted that in trading on competitor exchanges, Cotten incurred trading losses and incremental fees that adversely affects the crypto reserves of the exchange.

Between 2016-29, Cotten transferred 9,450 Bitcoin (BTC), 387,738, Ether (ETH) and 239,020 Litecoin (LTC) out of exchange’s accounts.

The report also detailed poor practices and mismanagement, noting that Quadriga had no contingency plan for the loss of its funds or the owner. The exchange even engaged in poor accounting practices and did not maintain any documentation.

EY Recovers $32 Million in Fiat

While Cotten had full access to the platform, the system didn’t register its activities within the site that EY says this approach could be made on Cotten’s request.

It has also been found that a significant amount of fiat currency was transferred to both Cotten and his widow. Per the report, the acquired assets of the pair worth about $12 million including a boat, aircraft, luxury cars and 16 properties in Nova Scotia.

As reported previously, Quadriga initially filed for creditor protection when the exchange lost access to its cold wallets and corresponding keys that held the assets owed to clients. This was after the death of co-founder Gerald Cotten.

So far, EY has recovered $32 million in fiat currency, with most of the funds collected from third-party payment processors and identified an additional $1 million in cryptographic competition.

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AnTy
AnTy
AnTy has been involved in the crypto space full-time for over two years now. Before her blockchain beginnings, she worked with the NGO, Doctor Without Borders as a fundraiser and since then exploring, reading, and creating for different industry segments.

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer

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