Death Of Crypto Exchange Boss Locks Up Trader Coins

Although the cryptocurrency markets are already a volatile and relatively risky platform, spare a thought for folks who trusted Canadian exchange QuadrigaCX. The exchange kept a large portion of user funds in an offline cold wallet but the the password for that wallet was held by a single person who died, locking up about US$190M.

The court filing obtained by CoinDesk revealed that a stash of bitcoin and various bitcoin forks were being held in cold wallets – which are cryptocurrency wallets that aren’t on a network-cnnected computer. This is usually a wise move as it mitigates some of the risk of an exchange being hacked and losing control of funds.

A major cryptocurrency exchange hack in Japan last year was successful as much of that exchange’s value was in a poorly secured hot wallet.

The death of QuadrigaCX founder Gerald Cotten means that the US$190M in coins is now locked up and inaccessible to its owners. And adding further complexity to the situation is a suggestion that there were some other dicey banking and accounting practices taking place.

Although regulators around the world are taking steps to better regulate the cryptocurrency industry there are still some exchanges that are engaging in “creative” practices when it comes to protecting the assets of traders using their platforms.

If you’re looking to trade in cryptocurrencies then make sure you do your homework. The markets are pretty low at the moment with the bell-weather bitcoin price down to around AU$4700 – down by about 75% since its all-time high a little over a year ago.

There are still a lot exchanges that are operated by smaller players who lack strong governance and experience in managing large tranches of wealth. If you’re planning to dabble in the cryptocurrency markets, my advice is to be cautious and do your homework.


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