QuadrigaCX’s late founder and CEO used customers’ funds to trade for his own account on other cryptocurrency exchanges, the Canadian firm’s bankruptcy trustee said.
In a bombshell 70-page report released Wednesday, Ernst & Young claimed that Gerald Cotten, who apparently died last December, transferred millions of dollars in crypto out of customer accounts and into other exchanges, with the funds being used to furnish Cotten’s personal lifestyle and trading habits. Overall, it appears that Cotten effectively stole more than $200 million USD from his customers.
“Significant volumes of Cryptocurrency were transferred off Platform outside Quadriga to competitor exchanges into personal accounts controlled by Mr. Cotten,” the report said. “It appears that User Cryptocurrency was traded on these exchanges and in some circumstances used as security for a margin trading account established by Mr. Cotten.”
Fees and trading losses “appear to have adversely affected Quadriga’s cryptocurrency reserves,” while other sums were sent to wallets whose owners EY could not confirm.
Between 2016 and the end of 2018, Cotten transferred 9,450 bitcoin, 387,738 ethereum and 239,020 litecoin out of his exchange’s accounts (respectively, $88 million, $105 million and $33 million USD at present market prices, though their values have fluctuated – and increased dramatically – over that time).
Cotten also appears to have created fake accounts on Quadriga, credited them with fiat amounts that did not actually exist, and use this fake fiat to purchase actual crypto from customers, with the largest account using the name Chris Markey.
Later, the report says that Cotten margin traded zcash, dash, dogecoin and omisego, where he “generated substantial losses.”
An unidentified third exchange received 21,501 bitcoin ($201 million in today’s prices) into an account under Cotten’s name.