Court monitors have found that cold wallets used by QuadrigaCX for storage are actually empty, thus deepening the mystery of what’s going on.

Following the ongoing saga of QuadrigaCX, the Canadian cryptocurrency exchange, is akin to reading Alice in Wonderland as the situation just gets curiouser and curiouser. Every few weeks brings another surprise that just makes the entire case more bizarre. A new report by court-appointed analysts says that cold wallets used by the exchange for storage are actually empty.

The Basics of the QuadrigaCX Insanity

Last December, Gerald Cotten, co-founder of the exchange, died in India due to complications from Crohn’s disease. His death essentially crippled the exchange as he supposedly ran the entire operation from his laptop and the fact that he was the only one with the private keys needed to access the cold wallets.

His widow sought court protection from class action lawsuits so that attempts could be made to gain the keys from Cotten’s encrypted laptop. The court system granted such protection, but the attempts to gain the info has not been successful.

The result is that just over $190 million USD in funds from over 115,000 users is locked away, unable to be retrieved. This has led to quite a deal of speculation such as Cotten is actually alive and that the funds have been stolen. The Coinbase CEO has even weighed in on the matter, saying that he believes the company was in dire straights and that Cotten’s death is being used to allow the company to sink.

New Developments

Two weeks ago, a little ray of hope surfaced for the users of QuadrigaCX. Reports surfaced where Cotten had told a podcast several years ago that he had stored the private keys in a bank safety deposit box. In the podcast, he said:

Essentially we put a bunch of paper wallets into the safety deposit box, remember the addresses of them. So we just send money to them, we don’t need to go back to the bank every time we want to put money into it. We just send money from our Bitcoin app directly to those paper wallets, and keep it safe that way.

Such paper records have not been located. However, a new bombshell has just exploded. Ernst & Young, acting as a court-appointed monitor, is combing through all of the exchange’s transactions. They found that the cold wallets used by the exchange for storage are empty.

The monitor looked at six wallets identified as cold storage and found that five of them had been empty since April 2018. The sixth wallet received Bitcoin from another exchange, and this crypto was then transferred to QuadrigaCX’s hot wallet on December 3, 2018. Ernst & Young are examining three other wallets that could be used by QuadrigaCX, but those wallets are also empty.

Another revelation is that the other co-founder of QuadrigaCX, Michael Patryn, may be a convicted felon that’s using an alias. The Globe and Mail is reporting that Michael Patryn is actually Omar Dhanani, a criminal who has done prison time. The report says that Dhanani also went by the alias of Omar Patryn and that an address used for both names is the same.

The reason why this is important is that Dhanani went to jail for being part of a criminal outfit called Shadowcrew.com, which sold stolen credit card numbers. The gang made nearly $4 million from their activities before being shut down by law enforcement. Michael Patryn denies the allegation.

The Kraken cryptocurrency exchange has posted several videos (shown above) on the entire QuadrigaCX fiasco, along with a healthy dose of speculation. Kraken is offering a $100,00 reward for the person who provides the most helpful tip in allowing the missing $190 million in missing funds to be restored to its rightful owners.

Overall, this case just gets more complex as time goes by. Why did a large exchange have no protocols in place in case of an emergency? If the cold wallets are empty, where is the missing cryptocurrency? Is Michael Patryn, a co-founder of the exchange, actually an alias for a convicted criminal? It’s crazy.

What do you think about all of this? Let us know in the comments below.

Images courtesy of Pixabay and YouTube/Kraken Bitcoin Exchange.