news Quadriga CX was found guilty of using a Ponzi scheme, according to OSC

[kyoukage01 3181]

Shortly after its founder, Gerald Cotten, has passed away due to complications from Crohn's disease, the cryptocurrency trading platform Quadriga CX he founded and operated has ceased operations.

 

When the trading platform has shut down, many frustrated clients have attributed the inaccessibility of Cotten's cold wallet, supposedly containing the cryptocurrencies they have deposited and transacted with, to its closure. But the Ontario Securities Commission (OSC) has begged to differ otherwise.

 

They have found in their investigation that the owner of the trading platform has been involved in a Ponzi scheme that stemmed from a shortfall in assets available to client withdrawals when the price of cryptocurrencies changed that probably happened after the 2017 Bitcoin bullrun bubble burst. Everything must have gone downhill from that point on until his death.

 

He has also been accused of channeling funds from clients to support his lavish lifestyle.

 

More on there articles:

https://www.cbc.ca/news/business/osc-quadriga-gerald-cotten-1.5607990

Spoiler

Crypto exchange Quadriga was a fraud and founder was running Ponzi scheme, OSC report finds

Tara Deschamps

 

 

The Quadriga cryptocurrency exchange that saw millions of dollars disappear just as its founder died was a "fraud" and Ponzi scheme, according to the Ontario Securities Commission.

 

The regulator said Thursday that Vancouver-based Quadriga's late founder Gerald Cotten committed fraud by opening accounts under aliases and crediting himself with fictitious currency and crypto asset balances, which he traded with unsuspecting clients.

 

Cotten, the OSC said in a new report, ran into a shortfall in assets available to satisfy client withdrawals when the price of the crypto assets changed. He started running a Ponzi scheme that covered the shortfall with other clients' deposits, the agency determined.

 

"What happened at Quadriga was an old-fashioned fraud wrapped in modern technology," the OSC said.

 

"Quadriga did not consider its business to involve securities trading and it did not register with any securities regulator. This lack of registration facilitated Cotten's ability to commit a large-scale fraud without detection. So did the absence of internal oversight over Cotten."

 

The OSC spent 10 months analyzing trading and blockchain data, interviewing key witnesses, collaborating with overseas regulatory bodies and using third-party and bank information to reconstruct what was going on at Quadriga in the months leading up to 30-year-old Cotten's death.

 

Cotton died due to complications of Crohn's disease during his December 2018 honeymoon in India, where he was also opening an orphanage. Around the same time, Quadriga users reported roughly $190 million in missing cryptocurrency.

 

Cotten's widow tried to locate passwords for Quadriga accounts, but Jennifer Robertson said she couldn't find any her husband had written down. The laptop he used was also encrypted, she testified, when Quadriga sought creditor protection last year.

 

On Thursday, the OSC attributed about $115 million of the $169 million clients lost to Cotten's "fraudulent" trading.

 

 

Another $28 million was lost when Cotten used client assets on three external crypto asset trading platforms without authorization or disclosure.

 

The OSC said he also misappropriated millions in client assets to fund his "lavish" lifestyle and because he was in sole control of the company ever since 2016, he "ran the business as he saw fit, with no proper system of internal oversight or controls or proper books and records."

 

"Quadriga clients could not have known what Cotten was doing," said the OSC.

 

Those clients entrusted their money and crypto assets to Quadriga, which provided "no meaningful insight" into how those assets were being stored, moved and spent and instead gave false assurances about asset storage.

 

By the time the OSC started investigating, over 76,000 clients — about 40 per cent of them Ontarians — were owed a combined $215 million.

 

Ernst & Young, Quadriga's bankruptcy trustee, was only able to recover $46 million in assets to pay out to clients.

 

"OSC Staff would likely have pursued an enforcement action against Cotten and Quadriga," the agency wrote in its report.

 

"However, this is not practical given that Cotten is deceased and Quadriga is bankrupt, with its assets subject to a court-supervised distribution process."

Jeff Kehoe, the director of the agency's enforcement branch, said in a statement that it was unusual, but necessary for the OSC to release the investigative report.

 

"While public release of an investigative report is rare, we believe the tens of thousands of Ontarians who entrusted Quadriga with their money and crypto assets deserve to know what happened," he said.

 

"Our aim in making this information public is also to prevent this type of situation from recurring."

https://www.msn.com/en-ca/money/topstories/canadian-cryptocurrency-firm-collapsed-due-to-ponzi-scheme-by-late-founder-regulator-says/ar-BB15mkL9

Spoiler

Canadian cryptocurrency firm collapsed due to Ponzi scheme by late founder, regulator says

Nichola Saminather

 

 

TORONTO (Reuters) - Last year's collapse of Canadian cryptocurrency trading platform Quadriga CX was due to a Ponzi scheme operated by founder Gerald Cotten, who died suddenly in December 2018, the country's biggest securities regulator said on Thursday.

 

Cotten died at age 30 from complications of Crohn's disease while volunteering at an orphanage in India, according to the Facebook page of Quadriga CX, which announced his death in January 2019.

 

"What happened at Quadriga was an old-fashioned fraud wrapped in modern technology," staff at the Ontario Securities Commission (OSC) wrote in a report.

 

"While public release of an investigative report is rare, we believe the tens of thousands of Ontarians who entrusted Quadriga with their money and crypto assets deserve to know what happened."

 

Facing losses when the price of crypto assets changed, Cotten covered the ensuing shortfall with other clients' deposits, according to the report.

 

Richard Niedermayer, lawyer for Cotten's widow, Jennifer Robertson, did not immediately respond to a request for comment.

 

Some 76,000 investors from Canada and around the world collectively lost at least C$169 million ($124.2 million) from the collapse of Quadriga in 2019, the statement added.

About C$115 million of that was due to Cotten's fraudulent trading, the regulator said.

 

When Cotten died, the platform owed approximately C$215 million to clients, according to the OSC. Cotten also siphoned off assets for personal use, transferring about C$24 million to himself and Robertson between May 2016 and January 2018, the report said.

 

About C$46 million was recovered by the bankruptcy trustee and paid to clients, and Cotten and Robertson returned assets worth about C$22 million, it said.

 

This news will really sadden the clients who have invested in this platform and have yet to recover their lost funds, since if proven beyond reasonable doubt, the chances for them to take their funds back becomes even slimmer.

 

Edited June 12, 2020 by kyoukage01

[BTC Future 3946]

So it was decided that it was a ponzi. Perhaps MtGox can also be considered the same then, as back in 2013 withdrawals began taking weeks to be executed until the final moment of the collapse. Waiting for income to pay your clients for withdrawals from accounts can be considered a financial crime, unless this is the banking system that mismanaged the funds. In this case (2008) noone is a scammer or gets punished.

Still what happened at Quadrica was a scam and if I remember correctly there was some investigation happening about the diseased owner of the exchange, as many people still believe that he might have faked his death and changed his identity.

[magd 5231]

Investors have no fault of this closure and as long as they have worked and trusted this platform, the platform management must return the currencies to their owners, otherwise it is fraudulent and has taken from the Corona crisis an argument to close without providing any compensation to users

[kyoukage01 3181]

On 6/12/2020 at 4:39 PM, BTC Future said:

Perhaps MtGox can also be considered the same then, as back in 2013 withdrawals began taking weeks to be executed until the final moment of the collapse.

The circumstances between Mt. Gox and Quadriga are different, but if the accusations at Quadriga are proven to be true beyond reasonable doubt, then the statement where both are engaged in dubious activities which led to their downfall will hold its ground. The clients all suffer in the end, and the resulting distrust to exchanges (and to crypto itself, to a certain degree) is going to hurt on the goal of widespread adoption of cryptocurrencies. That is not good.

 

On 6/12/2020 at 5:51 PM, magd said:

Investors have no fault of this closure and as long as they have worked and trusted this platform, the platform management must return the currencies to their owners, otherwise it is fraudulent and has taken from the Corona crisis an argument to close without providing any compensation to users

Investors are indeed the victims, and had their trust broken; therefore, they have every right for compensation. Unfortunately, as the articles in the links stated, the amount of money recovered in assets is significantly lower than the total amount that is lost by the exchange. Clients thus may possibly receive a pittance of their compensation compared to losses, or might not even receive anything at all.

 

[Whited35 15285]

Bad luck. It is the serious problems that so many centralized exchange platforms are making the scam exits.Maybe, you know very well, last time IDAX did the same. I had deposited amounts to perform trades but eventually made a scam exit without returning my funds so I am becoming more careful before choosing any sort of trading platforms. 

[Honny143 13612]

Exchange do scam and investors loss their funds I can't understand why this exchange owner's do this type of scams they breaks investors trust, because without investors this exchanges not survive so they have no rights to stolen someone's money, I hope this exchange refund the amount for their users.

[Moaz 7239]

Unfortunately there are many of these events that happen in the crypto world. A platform containing tens of millions of dollars of depositors ’money is suddenly closed and depositors pay the price of these unfortunate events. I think should to court return the funds to depositors

[TimopheyKa 3900]

In fact, it's certainly sad! But I do not think that it is normal to accuse a person who is no longer on our land of fraud... Of course, the exchange does not act quite correctly , and it must return the funds that were, back to its users. Otherwise, it will just be the most common fraudulent project that takes, but does not give!

[Captain Karim 0]

I would love to see your interesting articles, it is unfortunate that the founder of the exchange platform does such a bad act and disposes of people's money for his personal benefit, but more unfortunate than that is to close the exchange after his death and this is not a justified reason, is it reasonable that such a project is related to a person One!!.

[Shaza Ahmad 1682]

This is really a pity, so we have to move away from unreliable exchange platforms and only trade on exchange platforms that we trust in their management, team and history.

[Cryptomint 433]

On 10/20/2020 at 1:02 PM, Shaza Ahmad said:

This is really a pity, so we have to move away from unreliable exchange platforms and only trade on exchange platforms that we trust in their management, team and history.

Yes you are right if we will go away from these kind of the platforms so it will be really good for everyone. And we will be safe from any kind of problem.

[abdullah553 1981]

On 6/12/2020 at 5:10 AM, kyoukage01 said:

Shortly after its founder, Gerald Cotten, has passed away due to complications from Crohn's disease, the cryptocurrency trading platform Quadriga CX he founded and operated has ceased operations.

 

When the trading platform has shut down, many frustrated clients have attributed the inaccessibility of Cotten's cold wallet, supposedly containing the cryptocurrencies they have deposited and transacted with, to its closure. But the Ontario Securities Commission (OSC) has begged to differ otherwise.

 

They have found in their investigation that the owner of the trading platform has been involved in a Ponzi scheme that stemmed from a shortfall in assets available to client withdrawals when the price of cryptocurrencies changed that probably happened after the 2017 Bitcoin bullrun bubble burst. Everything must have gone downhill from that point on until his death.

 

He has also been accused of channeling funds from clients to support his lavish lifestyle.

 

More on there articles:

https://www.cbc.ca/news/business/osc-quadriga-gerald-cotten-1.5607990

  Reveal hidden contents

Crypto exchange Quadriga was a fraud and founder was running Ponzi scheme, OSC report finds

Tara Deschamps

 

 

The Quadriga cryptocurrency exchange that saw millions of dollars disappear just as its founder died was a "fraud" and Ponzi scheme, according to the Ontario Securities Commission.

 

The regulator said Thursday that Vancouver-based Quadriga's late founder Gerald Cotten committed fraud by opening accounts under aliases and crediting himself with fictitious currency and crypto asset balances, which he traded with unsuspecting clients.

 

Cotten, the OSC said in a new report, ran into a shortfall in assets available to satisfy client withdrawals when the price of the crypto assets changed. He started running a Ponzi scheme that covered the shortfall with other clients' deposits, the agency determined.

 

"What happened at Quadriga was an old-fashioned fraud wrapped in modern technology," the OSC said.

 

"Quadriga did not consider its business to involve securities trading and it did not register with any securities regulator. This lack of registration facilitated Cotten's ability to commit a large-scale fraud without detection. So did the absence of internal oversight over Cotten."

 

The OSC spent 10 months analyzing trading and blockchain data, interviewing key witnesses, collaborating with overseas regulatory bodies and using third-party and bank information to reconstruct what was going on at Quadriga in the months leading up to 30-year-old Cotten's death.

 

Cotton died due to complications of Crohn's disease during his December 2018 honeymoon in India, where he was also opening an orphanage. Around the same time, Quadriga users reported roughly $190 million in missing cryptocurrency.

 

Cotten's widow tried to locate passwords for Quadriga accounts, but Jennifer Robertson said she couldn't find any her husband had written down. The laptop he used was also encrypted, she testified, when Quadriga sought creditor protection last year.

 

On Thursday, the OSC attributed about $115 million of the $169 million clients lost to Cotten's "fraudulent" trading.

 

 

Another $28 million was lost when Cotten used client assets on three external crypto asset trading platforms without authorization or disclosure.

 

The OSC said he also misappropriated millions in client assets to fund his "lavish" lifestyle and because he was in sole control of the company ever since 2016, he "ran the business as he saw fit, with no proper system of internal oversight or controls or proper books and records."

 

"Quadriga clients could not have known what Cotten was doing," said the OSC.

 

Those clients entrusted their money and crypto assets to Quadriga, which provided "no meaningful insight" into how those assets were being stored, moved and spent and instead gave false assurances about asset storage.

 

By the time the OSC started investigating, over 76,000 clients — about 40 per cent of them Ontarians — were owed a combined $215 million.

 

Ernst & Young, Quadriga's bankruptcy trustee, was only able to recover $46 million in assets to pay out to clients.

 

"OSC Staff would likely have pursued an enforcement action against Cotten and Quadriga," the agency wrote in its report.

 

"However, this is not practical given that Cotten is deceased and Quadriga is bankrupt, with its assets subject to a court-supervised distribution process."

Jeff Kehoe, the director of the agency's enforcement branch, said in a statement that it was unusual, but necessary for the OSC to release the investigative report.

 

"While public release of an investigative report is rare, we believe the tens of thousands of Ontarians who entrusted Quadriga with their money and crypto assets deserve to know what happened," he said.

 

"Our aim in making this information public is also to prevent this type of situation from recurring."

https://www.msn.com/en-ca/money/topstories/canadian-cryptocurrency-firm-collapsed-due-to-ponzi-scheme-by-late-founder-regulator-says/ar-BB15mkL9

  Reveal hidden contents

Canadian cryptocurrency firm collapsed due to Ponzi scheme by late founder, regulator says

Nichola Saminather

 

 

TORONTO (Reuters) - Last year's collapse of Canadian cryptocurrency trading platform Quadriga CX was due to a Ponzi scheme operated by founder Gerald Cotten, who died suddenly in December 2018, the country's biggest securities regulator said on Thursday.

 

Cotten died at age 30 from complications of Crohn's disease while volunteering at an orphanage in India, according to the Facebook page of Quadriga CX, which announced his death in January 2019.

 

"What happened at Quadriga was an old-fashioned fraud wrapped in modern technology," staff at the Ontario Securities Commission (OSC) wrote in a report.

 

"While public release of an investigative report is rare, we believe the tens of thousands of Ontarians who entrusted Quadriga with their money and crypto assets deserve to know what happened."

 

Facing losses when the price of crypto assets changed, Cotten covered the ensuing shortfall with other clients' deposits, according to the report.

 

Richard Niedermayer, lawyer for Cotten's widow, Jennifer Robertson, did not immediately respond to a request for comment.

 

Some 76,000 investors from Canada and around the world collectively lost at least C$169 million ($124.2 million) from the collapse of Quadriga in 2019, the statement added.

About C$115 million of that was due to Cotten's fraudulent trading, the regulator said.

 

When Cotten died, the platform owed approximately C$215 million to clients, according to the OSC. Cotten also siphoned off assets for personal use, transferring about C$24 million to himself and Robertson between May 2016 and January 2018, the report said.

 

About C$46 million was recovered by the bankruptcy trustee and paid to clients, and Cotten and Robertson returned assets worth about C$22 million, it said.

 

This news will really sadden the clients who have invested in this platform and have yet to recover their lost funds, since if proven beyond reasonable doubt, the chances for them to take their funds back becomes even slimmer.

 

There is this problem in cryptocurrencies when the manager of the platform or the owner of the wallet dies, all the money that he owned disappears and therefore there may be money for the investors as well, this matter must be resolved

[Syedbesharat 5423]

The project  CEO was a real schemer who used clients money and in the end leave world with having fun from others money. The clients will be sad and knows their is very Slim  chances of them to get back their investment. 

Gerald cotton  is not now in the world but he just destroyed the crypto and many future. I don't know about this but can imagine how misery this would be  upon people where their platform become out of reach. That's why I only use top and reliable exchanges for this and leave new projects. 

[Abdul1168782 572]

Yes you are right. And there is no fault with investor because they trust on that forum and invested their money on their behalf. So they need to get back their money with profit. This is their right.

[kyoukage01 3181]

On 12/16/2020 at 2:49 AM, Syedbesharat said:

The project  CEO was a real schemer who used clients money and in the end leave world with having fun from others money. The clients will be sad and knows their is very Slim  chances of them to get back their investment. 

Gerald cotton  is not now in the world but he just destroyed the crypto and many future. I don't know about this but can imagine how misery this would be  upon people where their platform become out of reach. That's why I only use top and reliable exchanges for this and leave new projects. 

You can't hardly blame the locals who just want to be nationalistic and would utilize a product/service that is locally available in their area. They were just so unlucky that they got duped(?) by one of their own.

 

QuadrigaCX was at one point reputed to be Canada's largest cryptocurrency exchange (Wikipedia entry here). Being a large exchange by itself would have attracted even more crypto users, just like with Binance, etc. But even top crypto exchanges can fall. Mt. Gox would be the best example of this.

 

EDIT: Requesting @ayatoslaw @epidemia to please close/lock my topic due to being old and irrelevant. Any updates can be discussed in another new topic.

 

Edited January 15, 2021 by kyoukage01
update: request for locking of topic