CEO’s suspicious death leaves $1.8 million in customer cryptocurrency frozen, inaccessible
And people are starting to ask questions...
The real problem with cryptocurrency is the same reason people love it so much: there is no government regulation.
It’s the wild west out there.
Most of the time, this fact plays to the advantage of The People, and to the disadvantage of The Feds. Cryptocurrencies are not taxed, they ensure the anonymity of both buyers and sellers, and they can be used to purchase any kind of goods (legal or otherwise). But sometimes, the deregulated nature of these futuristic forms of capitol works against the people using it.
Case and point: the recent death of QuadrigaCX CEO, Gerald Cotton.
QuadrigaCX is (or was) an established cryptocurrency exchange group, which allowed users to trade Bitcoin, Litecoin and Etherium. It was one of the largest exchanges in Canada, with some 363,000 users worldwide.
Cotton’s unexpected death on December 9th left roughly $180 million Canadian dollars ($137.21 million US) frozen in cyberspace with no possible way of accessing them. Cotton had the coins stashed in a “cold-wallet” on his laptop, for which he was the only person alive who had the password. Meaning all those coins, which can only be accessed physically and not online, are simply stuck — like a locked vault of gold bullion, without a key.
Cotton, who was volunteering at an orphanage in India at the time of his death, allegedly suffered from severe complications of crohn’s disease. His death was announced on Facebook on January 14th (notably a full month after his death in December). A week later, QuadrigaCX filed for creditor protection in the Nova Scotia Supreme Court, in a desperate bid to avoid bankruptcy.
Which, they will likely need if they plan on continuing business as usual. QuadrigaCX owes roughly $250 million to 115,000 of their customers, and they have an inaccessible fortune locked away on a dead man’s laptop.
It’s a predicament. One that Cotton’s widow, Jennifer Robertson, has vocally tried to resolve. “Despite repeated and diligent searches, I have not been able to find them [the passwords] written down anywhere,” she said. Robertson also contacted an expert, who, despite being able to knock loose a few coins, was largely unsuccessful in unlocking the main computer.
Robertson said in her affidavit that she has received online threats since the incident, “slanderous comments” and even speculation as to whether or not Cotton is actually dead…
They point out that, despite Cotton allegedly dying in December, the company didn’t announce his death until mid-January. On top of that, his name was misspelled on the death certificate, drawing into question its authenticity — in many places in India, you can buy documents like these very easily. Further, it was discovered that Cotton modified his will less than 2 weeks prior to his death.
And then, there’s the question of why there wasn’t a backup… You’d think that with so many customers and so much money locked away in his cold-wallet, Cotton would have at least written down the password somewhere, that he wouldn’t have held all that responsibility solely to unto himself. What if his plane had crashed flying across the Pacific? What if he died unexpectedly of some disease in a foreign country?
For someone as smart as Cotton allegedly was (and must have been to have started a company like QuadrigaCX) leaving no emergency back door, or backup password to so much money seems short-sighted. Possibly even out of character. Leading many to believe that the 30-year-old CEO faked his own death and ran off with the keys to some $180 million dollars in cryptocurrency, to live a new and opulent life somewhere where he’d never be found out or recognized.
Maybe. Or, he simply made a mistake. Is it so outlandish to imagine that he didn’t expect to die, that he figured the safest way to keep his customers’ money safe was to be the sole password carrier? Is it possible that an Indian doctor simply misspelled a western name on his death certificate, and that Cotton modified his will because he knew he was leaving the country?
It’s hard to say for certain.
Regardless, conspiracy or not, this whole situation outlines a very real problem that our society is going to have to wrestle with very soon: the regulation of cryptocurrencies. Certainly there are some incredible advantages to these coins being de-regulated. It has given people near total freedom as consumers, to buy and sell whatever they want, anonymously, without leaving a money trail. They are the currency of the future, and they are forcing us to rethink what exactly money is.
But without oversight, without any kind of regulation, the door is open wide for scoundrels and conmen to take advantage of the system. And there will always remain the possibility that the private individual holding the keys to the safe where your money is being held, dies, disappears or loses those keys… and you’re left with nothing, shit out of luck.
What happens with this case, could change the future of how cryptocurrencies are used and exchanged online. This could be the straw that breaks the crypto banks back, to usher in a new era of crypto-regulation.
Which, was probably inevitable, anyway. The "wild west" never stays wild forever.