QuadrigaCX, one of Canada’s largest cryptocurrency exchanges, made headlines all over the world after the sudden death of its founder resulted in the loss of $134 million of users’ funds.
The news came months after the troubled exchange had been complaining about banking issues, with some users describing problems with fiat and crypto withdrawals.
Given cryptocurrency‘s history (think Mt. Gox et al), reports of Gerald Cotten’ death served to exacerbate fears about the exchange‘s solvency or potential wrongdoing.
The situation, although ongoing, is beginning to take shape with some progress being made in the legal sphere.
As previously reported by Hard Fork, a Canadian supreme court has granted the exchange a 30-day-lifeline , allowing it to get its affairs in order with protection against lawsuits.
Although we do know much more than we did last month, many questions remain unanswered.
Hard Fork has taken a deep-dive into the cryptocurrency exchange‘s history, its founder, and recent issues in a bid to decipher the ongoing saga.
The history
QuadrigaCX, owned by Quadriga Fintech Solutions, was first launched in November 2013 and at the time was only being used to carry out local trades. Its online exchange was launched the following month.
A few months later, in January 2014, the company was credited with launching the second Bitcoin ATM in Vancouver.
Approximately two years later, Cotten became the company’s sole director following his colleagues’ resignation.
The director’s death
Gerald Cotten, the 30-year-old director, is thought to have passed away in India on 9 December 2018 from complications deriving from an existing chronic illness.
According to Jennifer Robertson, his widow, Cotten was taken to a hospital in Jaipur the day before he passed and was diagnosed with septic shock, perforation, peritonitis, and intestinal obstruction.
Cotten reportedly passed away following several episodes of cardiac arrest.
A death certificate was issued by the local Indian municipality, along with a “no objection certificate” from the police to facilitate Cotten’s repatriation to Nova Scotia.
An obituary – signed by Robertson, also his estate executor – shared on the company’s Facebook page on 14 January read:
“It is with a heavy heart that we announce the sudden passing of Gerald Cotten, co-founder and CEO of QuadrigaCX. A visionary leader who transformed the lives of those around him, Gerry died due to complications with Chron’s disease […] while traveling in India, where he was opening an orphanage to provide a home and safe refuge for children in need.”
“Gerry cared deeply about honesty and transparency–values he lived by in both his professional and personal life. He was hardworking and passionate, with an unwavering commitment to his customers, employees, and family.”
At the time, the post stated that Aron Matthews, Quadriga’s current head of operations, was being recommended by Robertson to assume the role of interim president and CEO.
“In the coming days and weeks, Aaron will provide further updates on the company operations. QuadrigaCX remains committed to servicing its customers in an open, timely and transparent manner.”
Cotten’s will was filed in late December. Robertson is the sole trustee of the estate, which is worth $9.6 million (Canadian). The estate includes a sailboat, a 2017 Lexus, an airplane, and real estate in British Columbia, and Novia Scotia. Cotten also set up a $100,000 (Canadian) trust fund to provide lifelong care for his two Chihuahuas.
Unconvinced by it all, some users suggested Cotten faked his own death in a bid to defraud customers through an exit scam – a fraudulent practice used by unethical cryptocurrency exchanges to vanish with investor’s money.
The money
The Canadian exchange says approximately 115,000 users are owed $134 million in both fiat and cryptocurrency.
Throughout his tenure, Cotten is believed to have carried out all his business using an encrypted laptop.
Robertson claimed in a court filing last week that neither she nor any of the company‘s employees know, or able to, gain access to Quadriga’s cryptocurrency reserves. They also claim not to know where the funds are located.
A consultant has been hired to try and break into the laptop but has so far been unsuccessful.
It’s not yet known when, but the laptop is expected to be handed over to EY, a professional services firm, appointed a monitor by the court.
To make matters worse, many of QuadrigaCX’s fiat reserves were tied up in an ongoing legal battle with the Canadian Imperial Bank of Commerce. In January, CoinDesk reported that customers were still unable to withdraw their funds.
It’s worth noting that this situation is still unfolding. Much of this information has only surfaced very recently, and conspiracy theories are sure to run wild in the meantime.
Bitcoin’s price has pumped beyond its ‘intrinsic value,’ JPMorgan says
Banking behemoth JP Morgan Chase & Co. has taken another shot at Bitcoin, claiming the cryptocurrency‘s latest rally has pushed its price beyond its “intrinsic value.”
“Over the past few days, the actual price has moved sharply over marginal cost,” JPMorgan analysts wrote in a note obtained by Bloomberg . “This divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time this divergence was resolved mostly by a reduction in actual prices.”
To come to this conclusion, the JP Morgan team treated Bitcoin as a commodity, calculating its “cost of production” based on a number of factors, including estimated computational power, electricity expense, and hardware energy efficiency.
“Defining an intrinsic or fair value for any cryptocurrency is clearly challenging,” the analysts continued. “Indeed, views range from some researchers arguing that it has no fundamental value, to others estimating fair values well in excess of current prices.”
Bitcoin‘s price briefly dropped from almost $8,000 to $7,050 on May 17, after $250 million of long positions got liquidated on BitMEX. Since then, BTC has surged back to $7,893 at the time of writing.
By now, JP Morgan has made a habit out of thrashing Bitcoin and cryptocurrencies. Back in 2017, CEO Jamie Dimon called the currency a “fraud” – a statement he later softened, suggesting he simply doesn’t care about Bitcoin. Since then, JP Morgan launched its own blockchain-based “digital currency,” which was neither a cryptocurrency, nor a stablecoin.
Yet another cryptocurrency mining botnet caught targeting China
It seems we can’t go more than a week without news of a new cryptocurrency mining malware or botnet being discovered. This time, security researchers have uncovered another Monero mining botnet that’s targeting China.
One of Trend Micro’s security systems uncovered a URL spreading the cryptocurrency mining botnet, which was also bundled with a backdoor-based exploit, security researchers say . The experts also identified the malware has so far targeted computers based in China.
It’s believed that the Outlaw hacking group, known for another cryptocurrency mining botnet , is also responsible for this attack as the techniques used are almost identical to its previous exploits .
That said, researchers believe the hackers are still in the testing and development phase. Trend Micro identified a number of scripts and files that, while contained in the malware, were not used, suggesting they may be laying dormant as they wait for future editions of the botnet.
It’s unclear if this mining botnet has mined any cryptocurrency, or made any successful attacks yet.
How does it work?
The Monero mining botnet uses a brute force attack and Secure Shell (SSH) exploit to give the attackers remote access over victim’s systems.
Once the attackers have access, the malware executes two commands, one of which is to download and install the cryptocurrency miner payload. If the malware detects cryptocurrency miners already installed on the system, it will delete them to reduce competition for system resources.
What’s also alarming, is that researchers uncovered an APK (Android Package) file in the malware. Given that the virus appears to be in development, it’s possible that hackers will go on to target Android mobile devices with malicious app files.
Earlier this week, security researchers uncovered another cryptocurrency mining malware that was sneaking its way on to Oracle web application servers .
Unlike Outlaw’s mining botnet which used brute force attacks, the Oracle malware was more cunning, and even hid itself in certificate files to remain unnoticed.
In April 2019, security researchers uncovered another cryptocurrency mining malware that was targeting Chinese enterprises and other systems across Asia. The cryptocurrency mining malware was spread through malicious Excel documents.
As ever though, Monero remains the preferred choice of cryptocurrency for hackers. It was estimated last year that browser-based crypto-jacking was generating over $250,000 per month in Monero.
