QuadrigaCX Founder Stored Private Keys On Paper Wallets?

Quadriga CX founder Gerry Cotten who died in the month of December 2018 may have stored the private keys to $143 million in cryptocurrencies on paper in a safety deposit box, reported Bloomberg.

True Bromance Podcast

In the month of February 2014, Cotten was interviewed on the “True Bromance Podcast” when in which the show’s emcees — actors Sage Brocklebank and Michael Karl Richards, and producer Brett Michael — were provided an introduction on cryptocurrencies and a description of his new enterprise. During the interview, Cotten also cautioned of the risks of losing passwords required to access Bitcoin to cold wallet storage systems.

Cotten further revealed that the soundest method to store private keys — which are essentially a chain of characters and numbers— is to print them off and store them offline in a safety deposit box. “So that way you can never have your Bitcoin (BTC) stolen, unless someone, like, breaks into the bank, steals your safety deposit box and gets into your private key and so forth,” Cotten continued.

There are more than 100,000 clients who are suffering due to Quadriga’s ongoing distress. Cotten, who operated Quadriga off his laptop, deceased while going in India, and people have no idea how to retrieve the cryptocurrencies the exchange was keeping for clients. Quadriga’s services have been closed and the Vancouver-based company is revamping under court-approved lender security with the cooperation of Ernst & Young Inc.

Private Keys On Paper?

Quadriga’s founder had unveiled that the team behind the exchange really stored its private keys offline in the company’s safety deposit box at a bank. Cotten described:

Essentially we put a bunch of paper wallets into the safety deposit box, remember the addresses of them. So we just send money to them, we don’t need to go back to the bank every time we want to put money into it. We just send money from our Bitcoin app directly to those paper wallets, and keep it safe that way.

On February 14, 2019, Nova Scotia Supreme Court Judge Michael Wood postponed a ruling on judicial representation for Quadriga clients, announcing that he would announce a written judgment in the case within a week. The court trial reportedly brought together more than dozen attorneys who serve 115,000 cryptocurrency traders, asking to refund CA$70 million ($52 million) in cash and CA$190 million ($142 million) in Bitcoin and other cryptocurrencies.

In the interview, Cotten also said that

At Quadriga CX, we’re obviously holding a bunch of Bitcoins that belong to other people who have put them onto our exchange. So what we do is we actually store them offline in paper wallets, in our bank’s vault in a safety deposit box because that’s the best way to keep the coins secure.

Just a few days ago, Quadriga had stated its clients have accounts with a whole balance of about C$250 million. Only approximately C$70 million of those client funds is in cash. About C$180 million, or about $136 million, is in cryptocurrencies kept in a stock account managed on Mr. Cotten’s laptop, the firm stated in its insolvency filing. Quadriga would require the power of that account to transfer those cryptocurrency reserves to clients.

Two independent researchers had said that openly accessible transaction histories with QuadrigaCX imply that the money may be withdrawn, not blocked. They say it seems Quadriga shifted client funds to other cryptocurrency exchanges, although it isn’t clear what might have occurred to the money. Gerald Cotten started Quadriga in December 2013. The exchange maintained to be one of the biggest in Canada, enabling clients to exchange a few of cryptocurrencies such as bitcoin and ether.

Disclaimer: This information should not be interpreted as an endorsement of any cryptocurrency. It is not a recommendation to trade. The crypto market is full of surprises and overhyped assets. Do your research before buying anything. Do not invest more than you can afford to lose.

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