QuadrigaCX co-founder transferred user funds for his own margin trading

QuadrigaCX Co-Founder Used User Deposits for His Own Trading, Created Fake Accounts

QuadrigaCX Co-Founder Used User Deposits for His Own Trading, Created Fake Accounts

Failed Canadian exchange Quadriga CX was seemingly a fraudulent crypto exchange and does not even "provide any visibility into whether Quadriga was operating profitably or not", according to the latest report from the QuadrigaCX CCAA (the Companies' Creditors Arrangement Act) monitor. He used some the crypto as a security for margin trading accounts he himself established on other exchanges.

This incredible list of "concerns" raised by Ernst & Young in its fifth report point out to a significant flaw system, which lacked financial reporting and operational control.

In addition to most of the activities being directed by a single individual - the now-deceased co-founder Gerald Cotton - EY notes that there was neither segregation between duties and basic internal controls, nor any segregation of assets between Quadriga's and user funds.

Cotten ran Quadriga largely from his computer, and his unexpected death in December whereas travelling in India threw the industry into disarray.

Between 2016-29, Cotten transferred 9,450 Bitcoin (BTC), 387,738, Ether (ETH) and 239,020 Litecoin (LTC) out of exchange's accounts. Quadriga's cryptocurrency reserves were "adversely affected" by trading losses and incremental fees charged by other exchanges, the report said.

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At the Filing Date, the report says, approximately 76,000 users were owed a combination of fiat and cryptocurrency by the exchange, including nearly Dollars 5.5 million and close to CAD 67 million, 26,295 BTC, 122,743 Litecoin, 89,924 Ethereum, etc.

E&Y's blockchain analysis further stated that the 5.6 BTC were transferred to wallet addresses controlled by Cotten, as well as a sum of 1,426.2 BTC, which were sent from the aforementioned Exchange Accounts to wallet addresses which the monitor has no information about.

Cotten is also said to have created accounts under aliases allegedly "Unsupported Deposits were deposited and used to trade within the Platform resulting in inflated revenue figures, artificial trades with Users and ultimately the withdrawal of Cryptocurrency deposited by Users". And "substantial funds" were transferred to Cotten personally and other related parties. That epic was enviornment to huge charges and generated huge losses. Based on the transaction details obtained, 21,501 BTC were deposited with the third exchange in an account under the name of Gerald Cotten. Ernst & Young's investigation suggests that at least some of that Bitcoin came from Quadriga, though it's unclear exactly how much.

Ernst & Young also updated the amount owed to QuadrigaCX users, to $74.1 million in cash and $140.5 million in cryptocurrency. Court filings from January initially estimated epic holders had $70 million in money balances and $190 million in cryptocurrency.

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