The long-running investigation into the loss of $190 million following the collapse of the doomed Canadian exchange QuadrigaCX has run into another brick wall.
For most of this year, court-appointed lawyers have been investigating whether there was a link between the now-defunct platform and the shady payments processing firm Crypto Capital—raising hopes that it may hold money belonging to victims.
But, the law firm Miller Thomson recently warned there is “insufficient evidence” to suggest this was the case—and now, a consultancy company that specializes in investigating fraud, bribery and corruption has been hired to perform further analysis on QuadrigaCX’s transaction data.
In an update shared with victims, the legal team announced that corporate investigations firm Kroll Inc’s global team of former prosecutors, forensic accountants and ex-law enforcement officers will be joining forces with the blockchain analytics service Coinfirm. Little is known about the scope of the investigation, or what the main lines of inquiry will be.
All of this means that those who lost funds could face an even longer wait to get compensated—if they ever are. No timeline has been given for the completion of an audit by the Canada Revenue Agency, and any recovered monies cannot be released until it is finished.
To say that the dead end reached with Crypto Capital is a setback would be an understatement. This company is mired in legal woes—cryptocurrency exchange Bitfinex, has alleged it was defrauded by this organization to the tune of $850 million. (In October, the head of Crypto Capital was arrested by Polish police on charges of money laundering.)
Insult to injury
Plans for the Canada Revenue Agency—the country’s taxman—to perform an audit were announced back in March. This meant that the personal information of QuadrigaCX’s 76,000 customers, including account balances and transaction data, were handed over.
But Magdalena Gronowska, who sits on the Committee of Affected Users of Quadriga, described this as an “unprecedented affront to individual privacy,” and suggested it could amount to a fishing expedition that could have long-term ramifications for how Canadian crypto exchanges operate.
The murky operations of QuadrigaCX unraveled when the exchange’s founder, Gerald Cotten, died suddenly in India—reportedly of complications linked to Crohn’s disease. He was 30 years old. His widow subsequently claimed that he was the only person with access to the company’s cold wallets, but further investigation concluded that they were virtually empty anyway.
Ever since, there have been allegations that Cotten’s untimely passing was used to cover up a massive fraud. Rumors have even circulated that he may not be dead at all, prompting some victims to demand that a court allows his body to be exhumed for testing.
Ultimately, it seems that there’s little hope that the lost funds will be recovered in full. According to the Ontario Securities Commission, just $35 million has been successfully retrieved or located, meaning that tens of millions of dollars remain missing.
In a damning assessment, the OSC said: “He [Gerald Cotten] misappropriated millions in client assets to fund his lifestyle. In its final months, Quadriga had almost no assets left and was operating like a revolving door—new client deposits were immediately re-routed to fund other clients’ withdrawals.”