A trustee's audit of bankrupt Canadian cryptocurrency exchange QuadrigaCX has discovered that its late founder siphoned millions of dollars from clients and spent it on himself and his wife.
Court-appointed monitor Ernst & Young said in a report that QuadrigaCX's late president Gerald Cotten had transferred the funds from customers' accounts to other cryptocurrency exchanges and then used the money to buy luxury goods, real estate and travel -- and to cover his trading losses.
According to the report, "significant volumes of cryptocurrency were transferred off platform outside Quadriga to competitor exchanges into personal accounts controlled by Mr. Cotten." "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," it said.
"In addition, substantial amounts of cryptocurrency were transferred to wallet holders whose identity the monitor has been unable to confirm." Cotten's wife Jennifer Robertson had previously said in an affidavit that the company had been unable to access encrypted computers that her late husband was believed to have used to store the cryptocurrencies, putting millions of dollars out of reach.
The files, for which Cotten alone had the passwords, were referred to as cold wallets.
Ernst & Young said it had identified 76,000 QuadrigaCX users that are owed a total of Can$215 million (US$163 million), but the firm has been able to recover only Can$33 million to date.
Skeptics had suggested Cohen faked his death. The report doesn't delve into that question but notes that Cohen had not maintained any proper accounting records over the past three years, and transferred large amounts of money without any oversight.
At the same time, he and his wife "acquired significant assets including real (estate) and personal property" and "frequently travelled to multiple vacation destinations often making use of private jet services." QuadrigaCX had announced mid-January that Cotten died of complications from Crohn's disease on December 9 while volunteering at an orphanage in India. He was 30.
Nova Scotia's high court in February granted his wife's bankruptcy application on behalf of the company.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)