The mystery of cryptocurrency exchange QuadrigaCX is deepening.

Days after it was revealed the company’s founder had died without passing on access to customer funds, there are claims of dodgy death documents and a history of mysterious transactions.

Users who lost a combined US$150M are convinced something doesn’t add up.

Reports that QuadrigaCX CEO and Founder Gerald Cotten died in India from complications from Crohn’s disease at the age of 29, without giving someone else access to his company’s reserves, were weird enough.

But now the curious case is sparking conspiracy theories so unfathomable, they could form the basis of a Hollywood movie.

The Death Certificate

After first reporting on the debacle, Micky has been made aware of a death certificate circulating the web, which raises some serious questions.

“(It) spells his name wrong, as Cottan,” one observer said.

“India is a hotspot for death faking … He faked his death because his exchange was running a ponzi scheme where he would need to pay one customer withdrawal request with another customer’s deposit.

“And when the market goes south, new customer deposits dry up.”

Micky has been unable to confirm if the Indian death certificate is legitimate, but even if it’s not, there are definitely some unusual circumstances around this case.

The expert investigation

Taylor Monahan, the CEO of MyCrypto, thoroughly analysed QuadrigaCX’s wallet addresses to see whether US$150M really has been left stranded since Gerald Cotten reportedly died of complications from Crohn’s disease, without passing on access to his company’s reserves.

“One of the benefits of the blockchain is that whenever a transaction happens on chain, it’s public,” Ms Monahan told the Unconfirmed Podcast.

“And when you have large exchanges like QuadrigaCX, usually it’s common knowledge what their addresses are.”

Ms Monahan says she began by looking at the wallet addresses that QuadrigaCX has publicly revealed as being its own.

“You can look through all the transaction history. You can follow the money,” she said.

Concerning discovery

QuadrigaCX says its founder took “sole responsibility for the handling of funds” and because no one other than him can access the coins in the cold wallets, there is US$150M essentially stranded.

Ms Monahan, however, has been unable to find that money.

“In my research, I have found no pile of money sitting anywhere,” she said.

Ms Monahan says there’s a possibility the money is sitting in a wallet somewhere, and that she just hasn’t found yet.

“That’s why even today I’m still diving deep into the transaction history and trying to find any place where money is,” she said.

“If there were any storage account with a significant amount of money in it, you would suggest for that to show up at some point.

“We don’t have any address that just held money, like you would expect for an exchange of this size, who’s utilising cold storage for their reserves.”

I'm seeing NO indication of Quadriga ever having cold / reserve wallets for ETH. Looking at their 3 main addresses:

0x027beefcbad782faf69fad12dee97ed894c68549 (green)

0x0ee4e2d09aec35bdf08083b649033ac0a41aa75e (blue)

0xb6aac3b56ff818496b747ea57fcbe42a9aae6218 (purple – active) — Taylor Monahan (@tayvano_) February 4, 2019

Where was money moving?

As with most exchanges, the primary movement of QuadrigaCX funds was between its exchange and its customers, but Ms Monahan also found something else.

“We’re seeing a lot of ether (ethereum) being moved to other centralised exchanges, primarily ShapeShift, Bitfinex and Poloniex,” she said.

Laura Shin, the podcast interviewer, immediately asked: “why would an exchange be moving funds to another exchange?”

“That is an excellent question,” Ms Monahan said, and then there was a long pause…

“It’s hard. One example of why an exchange may need to utilise another exchange would be … in order to obtain fiat (currency) to pay the bills.

“However, when I’m looking at the QuadrigaCX stuff, it’s a significant amount of money and far more than one would ever need for day to day operations. And … Poloniex doesn’t deal with fiat, (so) that theory doesn’t hold much water unfortunately.”

Ms Monahan also pointed out on Twitter that if someone at QuadrigaCX wanted to move money without anyone knowing who was doing it, they could have posed as one of their customers.

“They have a pile of users KYC (know your customer) data, she said.

“The could turn around and open an exchange account with any of the KYC data to move money.”

Oh, and just in case you weren't shaking your head enough,

don't forget that Quadriga ran an exchange with KYC. They have a piles of user's KYC data. They could turn around and open an exchange account with any of that KYC data to move money. Having fun yet? — Taylor Monahan (@tayvano_) February 4, 2019

How much did QuadrigaCX move?

Ms Monahan says the Poloniex deposit address has received 218,000 ether, which had an equivalent balance at the time of US$7.7M.

“The ShapeShift stuff is actually quite terrifying. We’re seeing 321,000 ether, with a total equivalent value at the time of transaction of nearly US$20M,” she said.

“I don’t really have any idea why they would ever use this money to an exchange, utilising ShapeShift is even weirder.

“Like, I really cannot understand why they would ever do this.”

“ShapeShift is primarily for fast, easy transactions. They have limits on the maximum value of each individual transaction and their rates are not competitive.

“If Quadriga wanted to swap their ether into Bitcoin, which is what they were doing via ShapeShift, ShapeShift is not the place to do it.

“They could have used their own exchange, they could have used another exchange, but the amount they spent on fees and just the higher spread on ShapeShift it just defies logic.”

2016: 0x0ee4e2d (blue)

Biggest outgoing TXs go to:

– A Bitfinex Deposit Address #1 (red)

– 0x027beef (green)

– 0xb6aac (purple) pic.twitter.com/jsPOnIADGI — Taylor Monahan (@tayvano_) February 4, 2019

Should QuadrigaCX customers be worried?

The unusual transactions just adds to the concerns of users, who have taken to social media to demand answers.

“The story of his death in India is questionable and we do have rights to be put at ease,” one user wrote on Reddit.

“The future of the company is something that regards all of us. Unfortunately, the individuals behind Quadriga are mostly anonymous and it gives little reliability and trustworthiness to them and now that the main figure of the company has passed, we are left without reassurance.

“Privacy is a luxury we appreciate as crypto enthusiasts, but this is not a luxury that Quadriga can permit themselves anymore especially when their credibility is at stake.

“We do respect Gerald’s life, his family and we send all of our condolences. I truly hope there is little pain through their loss. But, we also respect our intelligence and we do hate the notion of injustice.”

Ms Monahan also pointed out on Twitter that if someone at QuadrigaCX wanted to move money without anyone knowing who was doing it, they could have posed as one of their customers.

“They have a pile of users KYC (know your customer) data, she said.

“The could turn around and open an exchange account with any of the KYC data to move money.

“The exchange that they open the account on, they’d have no way to differentiate it between any legitimate customer.”

Investigation continues

“I want to just open my spreadsheet and see a random transaction and click it and be like ‘oh there’s the 400 missing ether that they mentioned,'” Ms Monahan said.

“I would love that because any time something like this happens in the space it harms the reputation of cryptocurrencies, it harms individual users, it harms businesses who are trying to gain trust.”

What’s next?

QuadrigaCX has admitted that its problem is unlikely to be resolved quickly and its customers’ funds won’t be returned any time soon.

“Cold wallets, by their nature, are highly encrypted and were kept off the QuadrigaCX server for security reasons,” it said in a statement on its website.

“Gerry took sole responsibility for the handling of funds for QuadrigaCX and as such no one other than him can access the coins in the cold wallets.” M

For the full details of Taylor Monahan’s research, listen to Laura Shin’s Unconfirmed podcast.