The death of a Canadian cryptocurrency exchange CEO and founder has left his company unable to access around $263 million (CAD$250 million) in cryptocurrency, due to an unrecoverable password.
Gerry Cotton – who founded Quadriga CX in 2013 – passed away suddenly on 9 December following complications of Crohn’s disease while building an orphanage in India.
And it now seems that his death may have been a costly one for Quadriga CX’s 115,000 customers.
According to the company, only Cotton himself had access to the exchange’s ‘cold wallets’, which are protected by a password.
This now means that the exchange (and its customers) cannot access millions in Bitcoin, Litecoin, Ether and other cryptocurrencies.
In a sworn affidavit, Cotton’s widow Jennifer Robertson claimed, “the laptop computer from which Gerry carried out the companies’ business is encrypted and I do not know the password or recovery key.”
“Despite repeated and diligent searches, I have not been able to find them written down anywhere.”
She also claimed to have engaged the services of “an expert” in the hope of recovering the password, but had only had limited success “in recovering a few coins”.
Like most exchanges, Quadriga stores most of its coins in an offline ‘cold’ wallet, in order to avoid being hacked. There are some accessible funds in the company’s ‘hot’ wallet, although this is only a small percentage of the funds owed.
The platform was eventually paused on 26 January – some seven weeks after Cotton’s death – with users continuing to deposit funds in this period.
This is not the first such problem the exchange has had.
As well as the inaccessible cold wallet, the company also has another $US53 million in assets currently tied up, following differences with third-party partners.
The exchange also had some of its funds frozen last year by the Canadian Imperial Bank of Commerce, which claimed that it was unable to determine whether the exchange or individual who purchased cryptocurrency owned the money in the accounts.
Quadriga CX eventually won the ensuing legal proceedings, however it did not receive back all of the funds that were frozen.
The company has now announced it is applying for creditor protection, as it continues to work to recover the funds.