Security

QuadrigaCX’s Crypto Crisis

WooCommerce

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Cryptocurrencies are volatile, to say the least. In recent news, the Canadian crypto exchange QuadrigaCX’s 30-year-old founder, Gerald Cotton, unexpectedly died in December 2018, taking his sole-access to the near $190 million in client holdings with him to the grave. Cotton, in the goal of increased security, used a ‘cold storage’ method of safeguarding the password used to hold the bulk of the cryptocurrencies his company had control of. Cold storage or cold wallets are procedures that store cryptocurrencies offline, which eliminates the risk of online threats such as hacking and ransomware. However, as Gerald Cotton was the only person who knew the password to the storage (not even his wife knew), many of QuadrigaCX’s clients are unable to access their funds.

Per a sworn affidavit filed by Jennifer Robertson, Gerald Cotton’s widow, QuadrigaCX holds around 26,500 Bitcoin (roughly $92.3 million USD), 11,000 Bitcoin cash ($1.3 million), 11,000 Bitcoin cash SV ($707,000), 35,000 Bitcoin gold ($352,000), nearly 200,000 Litecoin ($6.5 million) and about 430,000 Ether ($46 million), totaling $147 million. As of January 31, 2019, there were near 115,000 total users signed up to the exchange.

Neither Gerald Cotton’s widow, other employees of the company, or even skilled technical experts know the password or how to bypass the encryption; this issue also brought speculation on the exchange’s claims, such as information surrounding Gerald Cotton’s death, (reportedly died in Jaipur, India due to complications of Crohn’s disease) and other inconsistencies such as the company’s users finding that some of its crypto wallets have shown activity since this was all announced.

In terms of security, Gerald Cotton’s protective measures might very well be impenetrable, becoming somewhat of a legend to those, such as myself, who are passionate about cybersecurity. However, for those who use QuadrigaCX, this information could be quite devastating. While cryptocurrencies do fascinate me and have their benefits, it is events like this which show how dangerous they can be.

Source:

De, Nikhilesh. (31 Jan 2019). CoinDesk. “Crypto Exchange QuadrigaCX Files for Creditor Protection.” Retrieved from https://www.coindesk.com/crypto-exchange-quadrigacx-files-for-creditor-protection.

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