The cold wallets of the QuadrigaCX cryptocurrency exchange, the founder of which died, were empty

At the very beginning of February of this year, news was published on Habr that the founder and head of the Canadian crypto exchange QuadrigaCX died. His death has become a problem not only for family and friends, but for all customers of the crypto exchange.

The fact is that only the founder had access to the cold storage, he did not give the password to anyone. And he literally took his secret to the grave. According to the widow of the deceased entrepreneur, cryptocurrency exchange clients stored about $ 143 million in cryptocurrency and fiat on the company's wallets. It was believed that most of the amount is stored in cold wallets. But now it turned out that they are empty.

There are no funds on them startingsince April 2018. All operations on QuadrigaCX ceased in January 2019, leaving more than 115 thousand users without deposits.

Since February 5, the company has been protected from creditors as part of the bankruptcy procedure. The application for protection was submitted on January 31, 2019 by the board of directors of the company.

The widow of the deceased affidavit stated that in the hot wallet there was only a minimal amount of cryptocurrency. “Under the normal procedure, [QuadrigaCX founder and CEO Gerald Cotten] moved most of the coins into cold storage to protect them from breaking or other virtual theft.” According to the auditors, on the company's hot wallets - 51 BTC, 0.014 Bitcoin SV, 33 Bitcoin Cash, 2000 Bitcoin Gold, 800 Litecoin and 950 Ethereum.

The head of the company, being alive, had a good decision on the issue of information security. Attacks by attackers remained unsuccessful throughout the entrepreneur's life. Whether cybercriminals achieved success after his death is not known - the question remains open.

Ernst & Young began investigating customer transactions. And the results were disappointing. Experts managed to find out that the head of the exchange placed the funds of the exchange on six cold wallets. Five of them have remained empty since April 2018 (then the entrepreneur was alive, and the exchange was actively working). The sixth wallet received funds from another exchange, after which the money went to the hot wallet of another crypto exchange. It happened on December 3rd.

The fact that the entrepreneur used a cold wallet (or rather, six wallets) is not surprising. Many representatives of the world of cryptocurrencies do the same to protect their and client funds. Cold wallets are usually called physical devices that are disconnected from the network, which can be connected to a PC or laptop, if necessary, transfer funds from a hot wallet or carry out a reverse transaction.

An investigation of the experts showed that from April 2014 to April 2018, the volume of cryptocurrency on cold wallets was different - from 0 to 2776 bitcoins. On average, the volume of transactions per month was about 124 bitcoins. Part of the funds was transferred to accounts in other exchanges. The last transaction from QuadrigaCX accounts was made the day before the owner’s death.

After finding out this information, Ernst & Young conducted an analysis of three more cold wallets, which seemed to be used by the director of the crypto exchange to work with altcoins. But it turned out that there was nothing on them either. 14 more user accounts were found that were used for transactions and did not look like ordinary user accounts.

The cryptocurrency exchange platform was based on Amazon Web Services (AWS). Earlier it was stated that the entrepreneur’s widow did not have access to exchange wallets. Ernst & Young has sought permission to access Quadriga accounts in the interests of users.

In February, it was reported that customer funds held in fiat currency were intact. But their cryptocurrency exchange can not get because of the legal claims of the Canadian Imperial Commercial Bank (CIBC). Billerfy payment processor holds about 30 million Canadian dollars owned by the exchange's customers. Another WB21 operator is responsible for storing a further $ 9 million and $ 2.4 million. He also refuses to free up funds or reply to messages from Quadriga.

The operator stated the following: “WB21 does not confirm the correctness of the balances mentioned in the court testimony, and taking into account the current legal situation of Quadriga, our regulatory compliance team is forced to restrict access to accounts until the investigation is completed.”

Be that as it may, the crypto-exchange clients seem to have less and less hope of getting their money back. Some part may be returned (most likely, fiat). But about cryptocurrency, confidence is much less.