QuadrigaCX

QuadrigaCX was Canada's largest cryptocurrency exchange, founded in 2013. Its collapse is the oddest one here, because for a while it looked like an accident instead of a fraud.

In December 2018 the founder and CEO, Gerald Cotten, died of complications from Crohn's disease while travelling in India. He was 30. The company said Cotten was the only person who held the private keys to its cold wallets, so roughly CAD 169 million of customer funds were now stuck beyond anyone's reach. The story spread quickly: the only person with the keys had died, and the money was locked away with him.

Then the court-appointed monitor, Ernst & Young, looked at the wallets. They were empty, and had been since April 2018, eight months before Cotten died. There was nothing locked away at all. In June 2020 the Ontario Securities Commission concluded that Quadriga had "operated like a Ponzi scheme." Cotten had been running fake trades under aliases, paying real withdrawals out of new deposits, and spending client money on houses and a private jet.

Around 76,000 clients were affected. Creditors who filed roughly CAD 303 million in claims have recovered about 13 percent. The theory that Cotten faked his own death is popular and completely unproven, and it doesn't really matter either way, because the money was gone months before the funeral. If you can't audit a custodian, you're trusting it blind.

See Mt. Gox to FTX: The Custody Graveyard for where Quadriga sits in the pattern.