A “bitcoin friendly” payment processor with a reputation for accepting bank wires and not actually processing them, is allegedly sitting on $12 million CAD ($9 million USD) of Quadriga funds.

WB21 is not showing any sign of wanting to hand over those funds either. That has some Quadriga creditors worried that more of their money has vaporized.

When Quadriga, the largest crypto exchange in Canada, went belly up earlier this year, it owed its customers $250 million CAD ($190 million USD). Two thirds of those funds are in the form of cryptocurrency stuck in cold wallets that only the company’s dead CEO Gerald Cotten held the keys to.

Meanwhile, Ernst & Young, the court-appointed monitor in Quadriga’s Companies’ Creditors Arrangement Act, is trying to round up any funds that remain. EY has contacted nine third-party payment processors that may be holding money on behalf of Quadriga. Two of them, Billerfy/Costodian and 1009926 BC LTD, are in the process of signing over $30 million CAD ($23 million USD) to EY.

But according to an affidavit filed by Cotten’s widow Jennifer Robertson on January 31, WB21 has another $9 million CAD and $2.4 million USD “but is refusing to to release the funds or respond to communications from Quadriga.”

After this story was published, Amish Patel, WB21’s global head of litigation, told me in an email that the balances stated by Robertson “are not confirmed,” and that the account is “under investigation.” Patel also accused me of defamation and threatened me with legal action if I did not make several updates to this story.

1/4 – WB21 sent me an email accusing me of defamation and threatening me with legal action if I did not immediately make changes to my WB21 article.

My original article: https://t.co/7DFAT1Xird

WB21 full letter: https://t.co/Mr1KVKOR0V

WB21 amended doc: https://t.co/ejVOUFpnvK pic.twitter.com/h1e9VQaY6E — Amy Castor (@ahcastor) March 6, 2019

So, who is WB21?

WB21 stands for “web bank 21st century.” Launched in Switzerland in late 2015, the company touts itself as a virtual bank that lets you “streamline” opening up a bank account from 180 countries. But it is really a payment processor with a shady past that Quadriga got involved with—another shady business partner, what are the odds?

In June 2016, WB21 announced that it was accepting bitcoin deposits. Send in your bitcoin, and WB21 will credit your account in fiat—though it relies on payment service BitPay to convert the bitcoin to fiat. “The funds are instantly available on the account and can be sent out by wire transfers or spent with a WB21 debit card,” WB21 says.

The startup went on to launch a PR campaign that consisted of mainly, well, making stuff up. After 10 months of doing business, WB21 claimed it had 1 million customers and that it had sent cross-border payments totaling more than $5.2 billion.

Those number don’t really add up, especially when you consider it took Transferwise, one of the biggest London-based fintech companies, four years to get a comparable $4.5 billion in transfer money. Also, as Gruenderszene points out, in September 2016, WB21’s official app had only 100 downloads on Google’s Play Store.

In defense, WB21 CEO Michael Gastauer told Gruenderszene that WB21 doesn’t rely on its mobile app. A few hours after the conversation, Gruenderszene noted that the app disappeared from the store.

Boasting a $2.2 billion valuation, WB21 also claimed that Gastauer sold Apax Group, a previous payments business, for $480 million, and that WB21 turned down a $50 million funding round after Gastauer invested $24 million of his own money. Kadhim Shubber at the Financial Times did some digging and found no evidence of Apax being sold.

Yet Forbes (wait, did Forbes pull that story? Try this link), The Huffington Post and Business Insider all wrote about WB21’s incredible success. Though to its credit, Business Insider later added it was “unable to independently verify these numbers.”

In late 2017, WB21 even got itself in the Wall Street Journal after announcing that it was moving its European head office from London to Berlin after the Brexit vote.

How did WB21, a company spewing so many questionable facts and figures, manage to get all this media coverage? Like another company that we’ve been hearing about lately, the payment processor leveraged the power of social media. WB21 has a Twitter account with 65,000, mostly fake, followers.

Gastauer, a man in his mid-40s who hails from Germany, also appears in an impressive Youtube video at a hitherto unheard of “Global Banking Award 2018” event in Frankfurt, where he apparently won the award. Dressed in a tux, with a fog machine in the background, he is seen in the video giving a speech on the future of banking. “How do you come up with an idea like this?,” he says in the video speaking of his business successes. “Do you wake up one morning thinking you want to revolutionize an 80 trillion dollar industry?”

But the truth has a way of catching up. In October 2018, the U.S. Securities and Exchange Commission revealed a civil lawsuit accusing Gastauer of aiding and abetting the fraudulent sale of $165 million USD worth of shares in microcap stocks.

“In reality, WB21 Group was not a registered bank, and Gastauer’s ‘solution’ was actually a circumvention of banking regulations designed to disguise his clients’ [ . . .] identities,” the SEC said.

As it turns out, this was not Gastauer’s first run in with authorities. Writing again for the Financial Times, Shubber notes:

“In 2010, [Gastauer] was given an 18-month suspended sentence by a court in Switzerland for commercial fraud and counterfeiting. Around the same time, a British gambling company sued him in London for allegedly taking millions of pounds from it. He had set up a payments processor, the company claimed, but kept the payments.”

Shubber goes on to comment:

“The story of Mr Gastauer is not just about alleged wrongdoing in the financial markets; it shows how an accused fraudster might sell himself and his fantastical story using the modern tools of the internet age.”

A Google search finds the Internet littered with WB21 customers claiming the company stole their money.

In August 2018, “bitcoinjack” wrote of WB21 on Reddit: “They will accept incoming funds and credit your account but you will never be able to get it out. They will lie about outgoing payments until you give up.”

Consumer review website Trustpilot has a long list of people complaining that WB21 has taken their money and gone silent.

Quadriga customers began having trouble with WB21 about a year ago. Several complained on Reddit that their bank wires were either not coming through or delayed. In response, Quadriga covered for WB21, blaming the delays on a bank in Poland that it was using:

“We used WB21 for about a week, but the vast majority of delays related to wires comes from the fact that the intermediary bank that handled CAD wires for the Polish bank cut them off due to the association with Bitcoin. We had to reissue all of these from other payment processors, all manually, which has caused delays.”

(This story was updated on March 5, 2019, to include a statement from WB21.)