How often are we told not to share our passwords?
Well, customers of Canadian crypto exchange QuadrigaCX wish its founder, Gerald Cotten, had ignored this advice. Cotten, who reportedly died in December 2018, took with him a costly piece of information — the password to access the customers’ digital currency, which is being held in cold storage.
Cold storage is where a holder of crypto assets — in this case, the exchange — keeps the coins offline, or not on a computer or server. While cold storage mitigates the risk of a hack, access to the coins often requires passwords and encrypted codes for the devices that are holding the cryptocurrency.
And now the debacle has hit the courts.
According to a report by CoinDesk, Cotten’s widow Jennifer Robertson, in an affidavit, said it appears a significant portion of the cryptocurrency was in fact held in cold storage and the deceased Cotten was the sole holder of access to the coins, which included around 26,000 bitcoin BTCUSD, +0.51%
“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 written down anywhere,” said Robertson.
According to the affidavit, the exchange also held around 11,000 Bitcoin Cash, BCHUSD, +0.95% 11,000 Bitcoin Cash SV, 35,000 Bitcoin Gold, close to 200,000 Litecoin LTCUSD, +1.67% and more than 400,000 Ether ETHUSD, +1.16% All told, the value of the digital assets is around $190 million.
One hope for disgruntled customers is that some coins were being held on other exchanges, and Jesse Powell, the founder of the Kraken exchange has said his company would willingly hand over the private information to access these funds if asked.
“We have thousands of wallet addresses known to belong to @QuadrigaCoinEx and are investigating the bizarre and, frankly, unbelievable story of the founder’s death and lost keys. I’m not normally calling for subpoenas but if @rcmpgrcpolice are looking in to this, contact @krakenfx,” he tweeted.
We have thousands of wallet addresses known to belong to @QuadrigaCoinEx and are investigating the bizarre and, frankly, unbelievable story of the founder’s death and lost keys. I’m not normally calling for subpoenas but if @rcmpgrcpolice are looking in to this, contact @krakenfx— Jesse Powell (@jespow) February 3, 2019
But a message posted on QuadrigaCX’s website suggests efforts to recover funds have been futile, so far.
“For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets. Unfortunately, these efforts have not been successful. Further updates will be issued after the hearing,” the company said.
One course of action the company is considering is the sale of its operating platform to meet some of its obligations, the affidavit states.From here, Quadriga is hoping the court will schedule a Feb. 5 hearing to confirm a stay of proceedings in an attempt to pre-empt the filing of lawsuits, according to CoinDesk.