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Canadian bitcoin exchange deadQuadriga CEO Gerald Cotten dies, leaving $ million of cryptocurrency locked away - CNN
More than 75, Quadriga account holders also had questions. Additional investigations were begun by the Royal Canadian Mounted Police; the FBI; and at least two other law enforcement agencies that have not been publicly disclosed though one of them is likely a federal agency in Japan. The most effective and thorough investigation to date, however, has been conducted by anonymous accounts posting on Twitter, Reddit, Pastebin, and Telegram.
Their findings, though baroquely technical, could be distilled to a two-word conclusion:. Cotten was a computer nerd who had entered the right business at the right time and succeeded beyond his wildest dreams. The broad outlines of his story were blandly conventional, at least if you subtracted his interest in decentralized monetary systems.
His parents owned an antiques store; Cotten decided to go into crypto. A couple of years after graduation, Cotten moved to Vancouver and joined a clubby community of entrepreneurs who had become enamored with Bitcoin.
He attended meetups at coffee shops and dorm rooms, organized by a core group of about 10 people, who called themselves the Vancouver Bitcoin Co-op. Bitcoin would enable more than two billion people who lacked access to banks to send and receive payment; it would offer stability to citizens of countries with chaotic currencies; it would eliminate all banking fees. With that, Bitcoin became like any other form of currency, a mass delusion: Its value derived from the belief that it had value.
But it was not easy to buy or sell if you lacked technological sophistication and considerable patience. Seventy percent of the global Bitcoin trade was conducted through Mt.
Gox, a Tokyo-based exchange, and had to be funded by sending a bank wire to Japan. Because Canadian banks wanted nothing to do with Bitcoin, users had to transfer funds through a series of intermediaries, bleeding transaction fees. It was just such a challenge. In November Cotten and an older business partner, Michael Patryn, an authority on currency trading with passions for Brazilian jujitsu and luxury automobiles, incorporated the Quadriga coin exchange, or QuadrigaCX named, for reasons that were not immediately clear, after the horse-drawn chariots of the Roman Empire.
In a small, inefficient market, Quadriga swiftly distinguished itself. Quadriga installed a Bitcoin ATM in its office, the second of its kind in Canada, and accepted gold by the ounce, which could be dropped off in person.
Often Quadriga was the only Bitcoin company willing to pay for a sponsorship. It put us in a particular place of need. He seemed to prefer acquaintances over friends. In January Salkeld posted a video on YouTube in which Cotten gently teaches his young daughters how to operate the Bitcoin ATM; Salkeld is certain that his two-year-old is the youngest person ever to have purchased Bitcoin.
Cotten said he had a helicopter license and offered to take Salkeld on a ride. But he never did. In February , six weeks after Quadriga launched, Mt. The following year it launched a bid to be listed on the Canadian stock exchange, submitting to a full financial audit.
The exchange took a cut of every transaction. Still, the eulogies had a prismatic quality; viewed from an angle they suggested darker possibilities. He used to crack jokes all the time. Unsolved crimes attract amateur detectives, who canvass the internet for clues.
Law enforcement has the edge in nearly every other category: crime labs, informants, surveillance technology, forensic databases, the threat of arrest. When it came to the case of the missing Quadriga millions, however, the balance was reversed.
About 76, individuals held accounts on Quadriga, and some of the most technically sophisticated of them were out hundreds of thousands of dollars or more. But just about every cryptocurrency expert in Canada had a Quadriga account. They had believed in Cotten and felt betrayed. They wanted answers. They wanted revenge. Traditional law enforcement, meanwhile, had only the vaguest understanding of the subject.
The Royal Canadian Mounted Police asked questions so rudimentary that they shocked the experts they interviewed. For months, Miller Thomson, the Bay Street law firm appointed to represent the class of creditors, received hundreds of emails a day inquiring about the lost funds, and answered such a constant barrage of phone calls—heartbreakers about lost pensions and college savings, babies crying in the background—that its lawyers could do little else.
Bitcoin was founded on the principle that no individual or institution should be trusted. Every Bitcoin transaction appears in a public ledger—the blockchain—that can be consulted by anybody with internet access. He was driven to a private hospital and diagnosed with acute gastroenteritis. The following afternoon his condition deteriorated and blood tests indicated septic shock.
Before doctors could stabilize him, his heart stopped; he was revived, and his heart stopped again. Barely more than 24 hours after the onset of a stomachache, he was pronounced dead. No autopsy was requested. Confusion compounded confusion. The body was returned to the Oberoi and then sent out again to be embalmed; the embalmer refused to accept a body from a hotel, so Oberoi employees took it to a local medical college, where a staffer performed the procedure.
The following afternoon Robertson returned with the body to Canada. She left behind a dozen teddy bears they had planned to deliver to the Jennifer Robertson and Gerald Cotten Home for Orphaned Children. During that time Quadriga continued to accept new funds but returned none. It was also revealed that Cotten had written his will just four days before leaving for India. This was the detail that most shocked cryptocurrency professionals. If you lose the keys to your house, you can call a locksmith; if you forget the password to your savings account, your bank will provide a new one.
If you lose the private key to your cryptocurrency wallet—a long, randomly generated password, all but impossible to memorize—your funds are gone forever. The cautionary tales of fortunes lost because of misplaced private keys have the quality, in Bitcoin mythology, of the homilies delivered at religious gatherings.
He befriended Cotten in in Toronto, where Cotten had moved during the effort to take Quadriga public. Cotten himself warned of this danger during a interview. Some of the earliest findings by the Reddit sleuths were more prurient than incriminating. All of it looked bad, but there was no confession of criminality.
Robertson was also not her birth name; she had gone from her given name, Griffith, to Forgeron and then back, following an earlier marriage and its dissolution, before finally landing on Robertson in The major break in the investigation was not a revelation, exactly, but something that had been hiding in plain sight.
As it turned out, Michael Patryn—as Michael Perklin and nearly everyone in the close-knit Canadian cryptocurrency community had known for years—was not really Michael Patryn. Which meant that Cotten was not really who he said he was either.
The chat group Quadriga Uncovered has nearly members, many of them creditors who use the forum to discuss details of the claims process and share revelations and theories about the case. The chat is also frequented by journalists, detectives from the FBI and RCMP, and several of the targets of the ongoing criminal investigations, including Patryn, whose exact whereabouts have been unknown for about a year.
In his comments—both in the group chat and in a private chat—he has minimized his involvement in Quadriga and declines to speak in detail about his past.
But it was his past that, early on, became the focus of the Quadriga investigation. Patryn made people uncomfortable. He had seemed to appear in Vancouver out of thin air. They were excited. They usually did the outreaching; nobody had reached out to them before. Patryn came to the next meeting.
Hi, he said. Or Michael from Italy. But it came from a place of organization—he knew what he was doing. Patryn was described as ostentatiously secretive—a trait not uncommon in cryptocurrency circles—and made vague allusions to a shadowy past and underworld connections. He was sturdy and muscular, with blackwork tattoos and a face that in repose seemed to glower. On Facebook he posed with a tiger, a lion, behind the wheel of a Lamborghini, straddling an ATV in a desert.
Friends say he spoke of an emotionally absent father, manipulative family members, his obsessive-compulsive tendencies. He saw himself as an enforcer—of rules, of integrity, of loyalty.
He seemed lonely. When Patryn told a stupid joke that nobody found funny, Cotten would burst into wild laughter. They were an odd pair. They traced the relationship back to , to a dingy warren of a website called TalkGold. Gerald Cotten may have had a sophisticated grasp of cryptocurrency, but his expertise—his formal training—lay in the art of the confidence game.
TalkGold was a Ponzi clearinghouse, where blind faith and curdled cynicism engaged in a demonic rumba. TalkGold was run by twins Edward and Brian Krassenstein until , when agents from the Office of Homeland Security seized their files and froze their assets but never charged them with a crime.
Subsequently the brothers would gain Twitter notoriety for their incessant attacks on Donald Trump before they were shut down for operating fake accounts and purchasing followers. Patryn joined TalkGold on April 3, , the year the site launched. In one of his first posts he boasted of earning 30 percent monthly returns in HYIP investments.
Cotten opened his account three months later, shortly after his 15th birthday. Cotten tried to scam Patryn; Patryn tried to counter-scam Cotten. Cotten was a quick study. We do not invest in stocks, bonds, shares, precious metals or antiques. All I will say is that we will generate your return and that we are not what is called a ponzi or pyramid scheme. In isolation this might be written off as teenage hijinks—or at most light fraud.
Patryn, though six years older than Cotten, was only Both men soon graduated, however. In October , TalkGold members began to debate whether Patryn might in fact be Omar Dhanani, one of 28 suspects who had been arrested by the U.
Secret Service in a global sting operation targeting an online marketplace for stolen credit card information and forged documents. Upon pleading guilty to conspiring to transfer stolen identification documents, he was sentenced to 18 months in federal prison. After his release in , he was deported to Canada. In a gambit of either flagrant carelessness or irrepressible egotism, Dhanani officially changed his name to the pseudonym he had used in his online criminal ventures, first to Omar Patryn and later to Michael Patryn.
The most successful of these was Midas Gold, incorporated in early It served as an independent payment processor for Liberty Reserve: a digital currency that was operated by an American in Costa Rica and used by drug cartels, human traffickers, child pornographers, and Ponzis to launder money. Midas Gold was an intermediary between Liberty Reserve and its traders, transferring cash into digital currency and back again, ensuring that no centralized record of clients existed. In its registration documents, Midas Gold listed as its contact gerald.
Midas Gold, which had begun to accept Bitcoin, was seized too. By that point, however, a new Gerald Cotten venture was already six months old.
The Quadriga Fund was an HYIP that claimed to invest in venture capital projects and foreign currency exchange markets; it could be funded with Liberty Reserve and Bitcoin, using payment processors operated by Patryn. She described hiring a security expert to help recover information about the Quadriga Fintech Solutions Corp.
As executor of Cotten's estate and owner of 43 per cent of the company's shares, Robertson filed a petition in civil court in B.
So-called hot wallets are for live transactions — while so-called cold wallets are for storage to keep coins safe from hackers. I'm kind of preparing for the worst. Yvette Brend is a Vancouver journalist.
Brend cbc. Pseudonyms will no longer be permitted. By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time. British Columbia Sudden death of cryptocurrency leader sends Quadriga into tailspin, panicking clients One of Canada's largest cryptocurrency exchanges has filed for creditor protection in Nova Scotia, leaving thousands of fearful customers with frozen assets and scant information.
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