Crypto, Death and Cold Storage
What happens when Blockchain becomes ‘Blockaun’
The great white north likes Bitcoin too, but how about losing all of your money? Ah the security dangers of cold storage. The fate of Bitcoin trader QuadrigaCX is a bizarre story and not one for the meek of heart or fragility of coin.
Canada’s largest cryptocurrency exchange, QuadrigaCX, has filed for credit protection in Nova Scotia, just the latest in a series of bizarre turns for the Vancouver-based Bitcoin dealer.
Bitcoin can burn you mates and cold-storage security can backfire.
- As many as 115,000 account holders are owed $250 million, which is locked up in “cold storage” only accessible to the recently deceased founder and CEO, Gerald Cotten
- At the time of the bankruptcy filing, QuadrigaCX held 26,500 Bitcoin worth $120 million, 430,000 Ether worth $60 million and several million dollars worth of Bitcoin Cash SV, Bitcoin Gold, and Litecoin, according to court documents.
Sudden Death a bit like Bitcoin
Bitcoin’s price decline has been sudden for a so-called generational investment opportunity. But people die unexpectedly too, and the death of a cryptocurrency leader has sent Quadriga into a tailspin of panicking clients.
You see this was not supposed to happen. Crypto fraud takes many forms.
QuadrigaCX’s troubles started early last year when CIBC froze accounts affecting 388 customers worth $28 million, citing confusion about ownership of those funds. Those funds were finally released by an Ontario court in December, according to a statement from QuadrigaCX.
News that its 30-year old founder, Gerald Cotten, died unexpectedly last December in India complicated legal woes further.
Jennifer Robertson announced that her husband Gerald Cotten, 30, had died of complications due to Crohn’s disease in India on Dec. 9, while opening an orphanage.
Canadian crypto exchange reportedly loses $190 million of customers’ money after founder dies
You want your Bitcoin and you want it served up in a cold wallet, but what if these Millennials have no idea what they are doing?
Curiously the new management group has been handcuffed because much of the company’s cryptocurrency reserves are locked in so-called cold wallets — unhackable offline accounts — that cannot be accessed by anyone but Cotten. Darn it Canada! It’s a bit like you to freeze my Bitcoin forever.
The company keeps a “minimal amount” of coins on the hot wallet, a server that is accessible to account holders.
In a story that is nearly beyond belief, how men use fake money needs to be really gone over on legal terms. Digital currencies, crypto, and how these exchanges are like banks look pretty amateur right now.
In an affidavit, Robertson explains: “The laptop computer from which Gerry carried out the company’s business is encrypted and I do not know the password or recovery key.”
QuadrigaCX’s website recently went down and the company filed for creditor protection, saying that it was trying to address some “liquidity issues.” You certainly have issues guys, issues of security, management and death by crypto. It really is a kind of fraud.
In court filings, Cotten’s wife says that the company owes its users $250 million CAD ($190 million USD), and that to protect its users funds from hackers, a portion of its users coins were kept in a “cold wallet” — a physical device that isn’t connected to the internet. Now I feel bad for the wife, and young gentleman and this organization, but I feel even worse for the customers with crypto stuck in Canadian cold storage limbo.
Cotten was the only person with access to the device, according his wife, and she doesn’t have the password to decrypt it. The company also had several banking and payment processor issues, with some other organizations holding QuadrigaCX’s funds. Yet another failure of security on the crypto fake internet, where your Ether can disappear just because someone dies.
I find this story so outrageous. You really want to blame leadership and people without common sense, apparently something quite common in the crypto world. On Jan. 31, QuadrigaCX announced it had filed an application in the Supreme Court of Nova Scotia for creditor protection, after months of transaction delays.
“The transfer of coins from the cold wallet to the hot wallet was performed manually by Gerry.”
Guys my crypto is not cotton candy, it’s my hard-earned savings, do you even realize that? Cryptocurrency Exchanges really don’t sound like safe places. They can be hacked but they can also succumb to poor management and security. How many stories?
A cryptocurrency exchange is not a quasi bank. Please don’t treat them as such. “It shows how nebulous the regulatory climate is in Canada with respect to cryptocurrency and that really needs to change or else another case like this could be just around the corner,” said a blockchain lawyer. Yeah no kidding. There’s been barely any regulation in the space, at all.
The internet is not happy. Many apparent account holders complained on Reddit they had not been able to access their accounts for months, while others wondered openly if Cotten really died at all.You can read Jennifer Robertson’s affidavit here. This story was first broken by the Vancouver Sun.
It seems likely that thousands of users will never be able to recover their funds. This stands as a huge break of crypto security and makes me roll my eyes in how many projects of blockchain feels now more like blockkaun (con).
QuadrigaCX is clearly the worst can scenario of what happens when Bitcoin and death mingle together without a contingency plan for the ills of cold storage. Those fabricated coins can also be lost, your savings can also be stolen by death. Bitcoin can’t only save you, it can ruin and bury you.