The deceased CEO of embattled Canadian crypto exchange QuadrigaCX may have stored the private keys to his customers’ cryptocurrency in a safety deposit box.
The revelations surfaced as the exchange scrambles to find access to its users’ digital assets following the death of Gerald Cotten. The exchange says he passed away in December of 2018, and since that time it claims it has no access to $145 million ($190 million CAD) in Bitcoin, Ethereum, Litecoin, Bitcoin Cash, Bitcoin SV and Bitcoin Gold.
The exchange says Cotten was the only person with access to the vast majority of its customers’ funds as he was the only one who held the private keys.
In a March 2014 episode of the True Bromance Podcast, Cotten talked about best practices for securing private keys that enable users to access crypto funds and make transactions.
“It’s like burning cash in a way. Even the US government with the biggest computers in the world could not retrieve those coins if you’ve lost the private key. It’s impossible to retrieve those.”
“The paper wallet is a great way to store your Bitcoins. Basically, all you need to send Bitcoins is your private key, which is a string of a ton of numbers and letters. The best way to do it is take your private key, print it off, store it offline in your safety deposit box, vault, whatever, and then take the public key, which is your address, and use that to send money to it. So that way you can never have your Bitcoin stolen, unless someone, like, breaks into the bank, steals your safety deposit box and gets into your private key and so forth.”
“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.”
“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.”
In an affidavit filed in January, Jennifer Robertson, Cotten’s widow, states that she does not have knowledge of the private keys.
“The laptop computer from which Gerry carried out the Companies’ business is encrypted and I do not know the password or recovery key. Despite repeated and diligent searches, I have not been able to find them (the passwords) written down anywhere.”
On February 5th, the exchange was granted creditor protection for 30 days, shielding it from investor lawsuits.