Cold wallets that were supposed to hold up to $180 million of Quadriga clients’ money have been empty since last April, according to blockchain experts at court-appointed monitor Ernst and Young.
The information comes from the third report of the monitor filed Friday in Nova Scotia Supreme Court.
The cryptocurrency exchange QuadrigaCX collapsed after its founder, Gerald Cotten, died suddenly in December on a trip to India. It was granted creditor protection on Feb. 5.
In its most recent report, the monitor detailed efforts of its blockchain experts to trace the electronic trail of cryptocurrency in and out of six cold wallets initially identified by Quadriga as a likely repository for funds held on behalf of roughly 115,000 clients.
The monitor said that between 2014 and 2018, the six wallets were found to have an average aggregate balance of 124 bitcoin. The highest aggregate balance was 2,776 bitcoin.
Accounts emptied in April
The monitor said those accounts were emptied in April 2018, “bringing the balances down to nil.”
The only deposit made to those cold wallets since was last month, when someone at Quadriga accidentally transferred $488,000 of bitcoin into the locked wallets instead of sending it to the monitor.
So far, the company has “been unable to identify a reason why Quadriga may have stopped using the Identified Bitcoin Wallets for deposits,” the report said.
Ernst and Young said three other potential Quadriga cold wallet addresses have been identified, but provided no further detail.
The monitor said that some of the bitcoin in the six empty wallets appears to have been transferred to other cryptocurrency exchanges. The monitor is contacting those exchanges to get transaction information for those accounts.
The report also revealed that 14 user accounts “may have been created outside the normal process by Quadriga… It appears that the Identified Accounts were created under various aliases.”
“The Monitor was further advised that deposits into certain of the Identified Accounts may have been artificially created and subsequently used for trading on the Quadriga Platform,” the report said.
The report said those 14 accounts were associated with “a significant volume of transaction activity, including trading and withdrawals of cryptocurrency to wallet addresses not associated with Quadriga.”
Monitor asks court to force release of data
Meanwhile, Amazon Web Services has refused to release a full copy of Quadriga’s trading and client data to the monitor.
The cloud backup accounts were held personally in Gerald Cotten’s name, and Amazon Web Services said consent from Cotten’s widow and heir, Jennifer Robertson of Halifax, isn’t enough.
The monitor has asked for a court order to force the release of the data.
“It is imperative that a copy of the Quadriga Platform Data is backed up and secured with the Monitor as soon as possible,” the report said.
Quadriga’s 30-day period of creditor protection under the Companies’ Creditors Arrangement Act is set to expire Thursday.
However, the monitor has indicated support for Quadriga’s request for an extension of 45 or 60 days, saying the company has “worked with due diligence and good faith since the Filing Date.” Representative counsel for Quadriga’s 115,000 clients have requested a 30-day extension be approved.
All parties will be in court for a hearing Tuesday at Nova Scotia Supreme Court in Halifax.
Robertson declined to comment on the report through her lawyer Richard Niedermayer of Stewart McKelvey in Halifax.