QuadrigaCX Nightmare Continues As Widow Issues New Statement and Canadian Regulators Revamp Framework for Crypto Platforms
A week after QuadrigaCX CEO Gerald Cotten and Jennifer Robertson arrived in India for their honeymoon on November 30, 2018, Cotten, who suffered from Crohn’s disease, reportedly died. A month later, on January 14, 2019, his death was publicly revealed. Since that time, Cotten’s widow and the exchange have been caught up in scandal, legal drama, audits, allegations, mystery and doubt.
The exchange says Cotten, who worked on his laptop, was the only person who had access to Quadriga’s cryptocurrency. Following his death, roughly $145 million in cryptocurrencies is still missing.
Robertson has issued a new statement, dated March 13th, revealing that law firm Stewart McKelvey no longer represents QuadrigaCX. Robertson also confirms that her husband’s death was “sudden and unexpected” amidst conspiracy theories that Cotten is still alive and that his death was a ruse to escape financial troubles.
Robertson says Cotten used his own personal funds to keep the exchange afloat. As for her own actions, Robertson insists that she has been doing her very best to recover the lost crypto.
“I took direction and advice from its main contractors, and its then lawyer, utilized my own funds to keep it afloat, agreed to and paid for an experienced investigator to try and recover its assets, and then initiated the [Companies’ Creditors Arrangement Act] process which led to [Ernst & Young’s] appointment as Monitor.
Since the appointment of EY as Monitor, I have tried to be responsive, helpful and cooperative with the Monitor in the operation of the QCX business and the search for its cryptocurrency and other assets. As this matter progresses, my intention is to continue to support the process and to ensure a fair and equitable resolution is obtained.”
A report by Decrypt establishes the unraveling of QuadrigaCX’s financial troubles in part to funds that were frozen in 2018.
“In January, 2018, the Canadian Imperial Bank of Commerce (CIBC) froze $30 million of funds belonging to QuadrigaCX because it couldn’t identify the owners of the funds. Customer complaints rained down on QuadrigaCX as people struggled to access their funds. This led to fewer people using the exchange and its daily trading volume dwindled to $600,000 by October, 2018.”
The disappearance of the millions in crypto assets owned by QuadrigaCX’s customers has prompted Canadian officials to create new regulations.
The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) released a consultation paper on Thursday.
The paper proposes a new framework for regulating crypto activity.
- Custody and verification of assets
- Price determination
- Surveillance of trading activities
- Systems and business continuity planning
- Conflicts of interest
- Clearing and settlement
- Applicable regulatory requirements
According to the proposal,
“While the Proposed Platform Framework builds on an existing regulatory regime that was designed for a wide variety of market participants, we recognize that the existing regulatory requirements, and particularly the Marketplace Rules, were designed for marketplaces trading traditional securities (such as equities and debt). The CSA supports innovation in our capital markets while protecting investors and promoting fair and efficient capital markets. We are therefore considering a set of requirements tailored to Platforms’ operations that appropriately addresses the new risks introduced.”
“When looking at the operations of a Platform, we will assess whether a Platform’s risk management policies and procedures are appropriate to manage and mitigate the custodial risks. Expectations will be guided by the operational model of the Platform. For example, if the trades on a Platform do not occur on the distributed ledger, and instead the Platform keeps track of changes in ownership on its own internal ledger, we will evaluate whether the Platform has a robust system of internal controls, including records,that ensures that a participant’s crypto assets are accurately accounted for by the Platform and appropriately segregated from assets belonging to the Platform.”
Earlier in March, QuadrigaCX was granted a 45-day extension to find more than $100 million in lost Bitcoin, Ethereum, Bitcoin Cash, Bitcoin SV and Bitcoin Gold. The extension essentially prevents people from suing the exchange while the investigation continues.