Wednesday, February 6, 2019

QuadrigaCX: A history of suspicious activity

This is a compilation of everything suspicious I found with Quadriga. Please let me know if there’s anything incorrect or missing

Early History (2013-2017)

  • QuadrigaCX started in 2013 and made history by being the first crypto exchange to register with FINTRAC and accept gold bullion deposits. By 2015, Quadriga became Canada’s largest crypto exchange. So far, so good.
  • In March 2015, Quadriga attempted to go public and a month later, announced its intention to install Bitcoin ATMs across Canada. Both these plans were eventually aborted.
  • Even though Quadriga never listed, it started selling its shares over-the-counter. In Sep 2015, Quadriga stopped publishing audits. In March 2016, Quadriga was banned from selling shares after the BCSC issued a cease trade order (CTO) for not submitting an audit.
  • Around the same time, 3 of Quadriga’s 5 directors (Anthony Milewski, Lovie Horner, Bill Filtness) and CFO (Natasha Tsai) all resigned. Sometime in 2016, Director and Co-founder Michael Patryn resigned. This left Gerald Cotten as the only remaining director.
  • Evidence shows that Michael Patryn has used several aliases (including Omar Dhanani) and is a convicted identity thief
  • In June of 2017, QuadrigaCX announced it lost over 67,000 ETH (about $14M USD at the time) due to a technical glitch.
  • The Terms of Service on Quadriga’s website have always suspiciously stated that:

All account fundings are considered to be purchases of QuadrigaCX Bucks. These are units that are used for the purposes of purchasing Bitcoin or other cryptocurrencies. QuadrigaCX Bucks are NOT Canadian Dollars. Any notation of $, CAD, or USD refers to an equivalent unit in QuadrigaCX Bucks, which exist for the sole purpose of buying and selling Bitcoin and other cryptocurrencies.

QuadrigaCX is NOT a financial institution, bank, credit union, trust, or deposit business. We DO NOT take Deposits. We exist solely for the purposes of buying and selling cryptocurrencies.

Banking troubles throughout 2018

  • In late Dec 2017, Jose Reyes (CEO of Costodian Inc, Quadriga’s payment processor) moved over a million dollars from Quadriga’s account and into his own personal CIBC account
  • Shortly after, CIBC froze these funds and tried reaching out to Gerry, who refused to speak with them
  • All throughout 2018, Quadriga’s fiat withdrawal times took 2-3 months to complete. Quadriga kept citing the CIBC freeze as the reason. What’s very suspicious is how Quadriga constantly lied to customers with promises such as “the withdrawal backlog will be cleared in 1 week” or “your funds have been processed” when in fact they were months away from doing so.

Period leading up to Gerry’s death

  • On Nov 27, Gerry filed his will just 12 days before his death. He left a plane, two houses, and $100,000 for the care of his two Chihuahuas.
  • Gerry had a plan for all his personal affairs in the event of his death but he had no contingency plan for $180M CAD of crypto in cold storage that only he had the private keys to?
  • India is a suspicious place to travel, considering Gerry had a medical condition and considering how easy it is to get a death certificate there
  • After a severe bear market, most crypto businesses have been struggling and laying off staff. It’s odd that Gerry, who has no history of philanthropy, chooses to donate money. Especially when his exchange is having so many banking troubles.
  • The organization that built the orphanage states on their website that they take care of all construction. There was zero need for Gerry to go to India
  • A reddit post shows that the orphanage exists, although it’s a mystery where the image came from
  • Bitcoin fell 50% in Nov – the worst monthly decline in 7 years. Gerry’s death occurred shortly after

Gerry’s death and announcement

  • On Dec 9, Gerry died in India “due to complications of Crohn’s disease.” However, there is a low probability that Crohn’s disease is fatal, especially at the young age of 30
  • Just a couple days later, a reddit post indicated someone bought 300 BTC on Quadriga at a 25% premium and moved the funds out of the exchange
  • It took Quadriga over a month to announce Gerry’s death on Jan 14th.
  • Over the following 2 weeks, Quadriga continued to assure customers that “our hot wallets are being filled and withdrawals are going slower but will complete.”
  • On Jan 28th, Quadriga takes down their website. Initially they said “an upgrade is being performed,” then the message changed to “site maintenance” before being changed to “Quadriga has filed for creditor protection” on Jan 31st.
  • The death certificate misspells his surname, as well as his parents’ surnames. The hospital that issued the certificate has a history of fraud.
  • The funeral home in Nova Scotia where Gerry’s funeral was held has no record/obituary of Gerry’s death. There is no picture showing Gerry’s deceased body.

Chain analysis of the crypto trapped in cold storage

  • Quadriga’s crypto wallets have substantially less than the reported $180M CAD
  • There were no cold wallets. Quadriga moved everything onto other exchanges (Poloniex, Kraken, Binance, Bitfinex, And Huobi)
  • There has possibly been movement from Quadriga Litecoin addresses since Gerry’s death
  • In the media, Gerry stated several times that Quadriga uses multi-sig cold storage. This is where 2/3 or 3/5 people can be used to authorize a transaction. Clearly no multisig was used if only Gerry had the private keys.

References:

Quadriga’s History

CCN Article listing suspicious activity

Court Documents


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