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QuadrigaCX Owes Customers $190 Million, Court Filing Shows

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Troubled Canadian crypto exchange QuadrigaCX owes its customers $190 million and cannot access most of the funds, according to a court filing obtained by CoinDesk.

In a sworn affidavit filed Jan. 31 with the Nova Scotia Supreme Court, Jennifer Robertson, identified as the widow of QuadrigaCX founder Gerald Cotten, said the exchange owes its customers roughly $250 million CAD ($190 million) in both cryptocurrency and fiat. The company previously announced it had filed for creditor protection on its website, but the filing itself provides greater details about its predicament.

As of Jan. 31, 2019, there were roughly 115,000 users with balances signed up on the exchange, with $70 million CAD in fiat and $180 million CAD in crypto owed overall, according to the filing.

The exchange holds roughly 26,500 bitcoin ($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, according to the affidavit.

It was not clear what portion of the exchange’s crypto holding were kept in cold storage, versus its hot wallet. In the affidavit, Robertson explained that “only a minimal amount of coins” were stored in the hot wallet, but specifics were not provided.

Robertson added that:

“The normal procedure was that [QuadrigaCX founder and CEO Gerald Cotten] would move the majority of the coins to cold storage as a way to protect the coins from hacking or other virtual theft.”

She added that Cotten held “sole responsibility for handling the funds and coins,” and the remaining team members have had no luck accessing the exchange’s cold wallets since.

There is a possibility that some of Quadriga’s funds are being stored on other exchanges, though this has not been confirmed, she said.

Cotten reportedly died of Crohn’s disease in Jaipur, India in early December 2018. The exchange announced his death earlier this month. A death certificate was included in the list of exhibits.

The founder seemingly had sole control or knowledge of Quadriga’s cold storage solution. Robertson wrote that after his death, “Quadriga’s inventory of cryptocurrency has become unavailable and some of it may be lost.”

She later added that she has no business records whatsoever for QuadrigaCX or its affiliated companies. While she does have Cotten’s laptop, the device is encrypted and she does not have its password or recovery key. While a consultant has been retained to try and recover the laptop’s contents, he has had limited success to date.

Fiat issues

The exchange’s access to its fiat holdings have also been “severely compromised” by banking issues, the filing says. In particular, a now-resolved legal fight with the Canadian Imperial Bank of Commerce (CIBC) has resulted in ongoing issues.

In particular, a payment processor working with Quadriga, Billerfy, has reported problems with finding a banking partner, preventing the processor from releasing any funds back to the exchange, and therefore, to its customers.

In addition to the roughly $30 million CAD currently being held by Billerfy, three other third-party processors are holding around $565,000 CAD combined.

A fifth payment processor called WB21 is holding another $9 million CAD and $2.4 million USD (roughly $9.2 million USD total) on Quadriga’s behalf.

However, WB21 “is refusing to release the funds or respond to communications from Quadriga,” the affidavit claimed.

WB21 could not be immediately reached for comment. The U.S. Securities and Exchange Commission is suing WB21 US Inc and WB21 NA Inc, as well as affiliated individuals on unrelated fraud charges.

Under an “additional issues” section, Robertson noted that users have also continued to deposit funds after Cotten’s death, which the exchange accepted. Some of these came from automatic deposits, though CoinDesk has confirmed that manual deposits were also accepted from at least one user.

Request for assistance

The affidavit concludes with a request that the court enter a stay of proceedings to preempt any lawsuits that might be filed.

The exchange “urgently needs a stay of proceedings which will allow Quadriga and its contractors additional time to find whatever stores of cryptocurrency may be available and also to negotiate the bank drafts available to Quadriga,” Robertson wrote.

“Many, if not all” of the exchange’s customers might suffer further damages without a stay, she said.

Users have been complaining about withdrawal issues and a lack of communication from QuadrigaCX’s team for months, with concerns exacerbated earlier this week when the website went down entirely for maintenance.

Robertson noted that the exchange’s new directors voted to “temporarily pause” the platform on Jan. 26. Though she did not explicitly say the website went down as a result, the portal only became inaccessible sometime in the morning on Jan. 28.

To help pay users back, the exchange is considering selling off its operating platform. “Multiple parties” have already approached the exchange to inquire about acquiring the operating platform, though none are named in the filing.

Robertson added that she believes the “trading platform may have significant value,” but this value may be reduced if the exchange is sued.

Read Robertson’s affidavit here:

Jennifer Robertson Affidavit by on Scribd

Canadian flag image via Shutterstock

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Fidelity-Backed Crypto Analytics Firm to Integrate Twitter-Based Crypto Sentiment Feed

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Crypto analytics firm Coin Metrics partnered with Social Market Analytics (SMA) to collaborate on a feed of real-time sentiment towards cryptocurrency based on social media data, according to a press release on June 17.

The new partnership intends to collect and analyze data posted by crypto community on social media in order to provide a new tool to help crypto traders to track social media sentiment data to build their portfolio strategies.

The new product will initially target sentiment data solely on social media giant Twitter, Coin Metrics CEO Tim Rice confirmed to Cointelegraph, adding that the firms are currently not considering integration of the service into Facebook.

Specifically,Coin Metrics will incorporate the product into market data platform, called the SMA cryptocurrency Sentiment Feed, providing calculated metrics of data on Twitter, according to a report by crypto media outlet The Block. In the report, Rice said that the calculation algorithms would include relevant tweets and calculate “19 different aggregate sentiment metrics down to snapshots of one minute.”

Social Market Analytics is providing social media-powered predictive data analytics to traditional capital markets participants in various markets, including stocks, forex, Exchange-Traded Funds (ETFs), futures, among others. Since its establishment in 2012, SMA has been a Twitter Finance partner, the firm’s CEO Joe Gits stated in an email to Cointelegraph.

Meanwhile, Coin Metrics is backed by major American investment management company Fidelity in February 2019, which participated in a $1.9 million funding round in February 2019.

Earlier today, social media giant Facebook released the white paper for its long-anticipated cryptocurrency and blockchain-powered financial project known as Libra stablecoin.





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Bitcoin Falls Near $9,000 as US Stock Market Sees Gains

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Monday, June 17 — most of the top 20 cryptocurrencies are reporting moderate losses on the day by press time, as bitcoin (BTC) falls Near $9,000 mark again.

Market visualization courtesy of Coin360

Market visualization courtesy of Coin360

Bitcoin is currently down about 3% on the day, trading around $9,045 at press time, according to Coin360. Looking at its weekly chart, the coin is up around 11%.

Bitcoin 7-day price chart

Bitcoin 7-day price chart. Source: Coin360

As Cointelegraph reported earlier today, bitcoin surpassed one million daily active addresses on June 14, according to blockchain statistics website CoinMetrics.

Ether (ETH) is holding onto its position as the largest altcoin by market cap, which currently stands at $28.2 billion. The second-largest altcoin, Ripple’s XRP, has a market cap of $18.1 billion at press time.

Coin360 data shows that ETH has seen its value decrease by about 2.27% over the last 24 hours. At press time, ETH is trading around $265. On the week, the coin has also gained almost 6.8% of value.

Ether 7-day price chart

Ether 7-day price chart. Source: Coin360

XRP is down by just over 0.43% over the last 24 hours and is currently trading at around $0.430. On the week, the coin is up about 6.7%.

XRP 7-day price chart

XRP 7-day price chart. Source: Coin360

Yesterday news broke that major money transmission network MoneyGram has entered into a strategic partnership with blockchain-based payments firm Ripple.

Among the top 20 cryptocurrencies, the only ones reporting gains are binance coin (BNB), which is over 1% up, and DASH, which is up over 2%.

At press time, the total market capitalization of all cryptocurrencies is $282.8 billion, over 11.6% higher than the value it reported a week ago.

As Cointelegraph reported earlier today, Social media giant Facebook has released the white paper for its long-awaited cryptocurrency and blockchain-based financial infrastructure project.

In traditional markets, the United States stock market is seeing gains so far today, with the S&P 500 up 1.17% and the Nasdaq up 1.73% at press time. The CBOE Volatility Index (VIX), on the other hand, has lost 0.46% on the day at press time.

Major oil futures and indexes are mixed movements today, with WTI Crude up 3.99%, Brent Crude up 2.43% and Mars US down 0.83% at press time. The OPEC Basket is up 0.57% and the Canadian Crude Index has seen its value increase by 5.57% in the 24 hours by press time, according to OilPrice.





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Facebook Has Yet to Answer US Lawmakers’ Questions About Libra Crypto

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Facebook is still working on its responses to a plethora of consumer protection questions about the Libra cryptocurrency asked by a group of U.S. senators last month.

The Senate Banking Committee wrote an open letter to Facebook at the beginning of May, asking the social media giant a number of questions about Libra, after word of the project leaked out in the press. The questions primarily centered around user privacy and data protection, though a few concerned the cryptocurrency network itself.

After months of speculation and rumors, the company formally unveiled its vision for Libra on Tuesday – but it has not yet submitted a response to the letter.

“We received the letter and are addressing the senators’ questions,” a Facebook spokesperson told CoinDesk Tuesday morning.

Early clues

To be sure, the documentation Facebook published offers a hint of what the answers to some of the committee’s questions might be.

Take, for example, the senators’ first two questions:

  1. How would this new cryptocurrency-based payment system work, and what outreach has there been to financial regulators to ensure it meets all legal and regulatory requirements?
  2. What privacy and consumer protections would users have under the new payment system?

Facebook’s new Libra white paper and supporting documentation outline the mechanism for the basket of fiat currencies and government securities that back the Libra token, as well as the Libra investment token that gives its governance council the ability to monitor and modify the network and its protocols.

Moreover, Facebook said in other documentation that it, or at least its new Calibra subsidiary, would secure money transmitter licenses in various U.S. states that treat cryptocurrencies as money. Calibra has also registered as a money services business (MSB) with the Financial Crime Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. (Though it is a legal requirement for businesses conducting financial transactions, registering as an MSB does not indicate any sort of regulatory approval.)

Calibra says it will also abide by European Union and Financial Action Task Force (FATF) guidelines, as well as the laws of each jurisdiction it provides services in. Facebook has also reportedly held talks with the Commodity Futures Trading Commission (CFTC) about Libra.

The Senators also asked if Facebook shares or sells any consumer information (or information derived from such data) with any unaffiliated third parties. Company literature says that neither Facebook nor Calibra will do so without consent from the customer.

Stay tuned

Still, the senators may want more detailed answers to these questions and others, specifically:

  1. What consumer financial information does Facebook have that it received from a financial company?
  2. To the extent that Facebook has received such information, what does the company do with it and how does it safeguard the data?
  3. Does Facebook have any information bearing on an individual’s (or group of individuals’) creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living that is used (either by Facebook or an unaffiliated third party) to establish eligibility for, or marketing of a product or service related to, credit, insurance, employment or housing?
  4. How does Facebook ensure that such information is not used in violation of the Fair Credit Reporting Act?

The senators’ letter did not give a deadline for Facebook to respond, and it is unclear when the answers will be sent.

Facebook CEO Mark Zuckerberg image via Shutterstock

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