QuadrigaCX scandal leads to exchange crackdown

A Canadian financial watchdog has told staff to subject custodial crypto exchanges to greater scrutiny in the wake of the QuadrigaCX scandal.

The Canadian Securities Administration (CSA) has outlined to staff the difference between exchanges that take custody of their clients’ assets and those that don’t.

Custodial exchanges will be subjected to traditional derivatives and security regulations, according to a document sent to staff.

It states: “Potentially, there will be ongoing reliance and dependence of the user on the Platform until the transfer to a user-controlled wallet is made.

“Until then, the user would not have ownership, possession, and control of the cryptoassets without reliance on the Platform.

“The user would be subject to ongoing exposure to insolvency risk (credit risk), fraud risk, performance risk, and proficiency risk on the part of the Platform.”

QuadrigaCX founder Gerald Cotten passed away a year ago following complications with Crohn’s disease while in India.

The 31-year-old’s death sparked a huge scandal and ensuing legal battle as it was revealed he was the only person with access to the exchange’s $190 million worth of user funds.

The exchange has ceased trading and is being investigated by Canadian financial watchdogs.

The reaction from investors and customers has largely been one of mounting anger, with many even suggesting Mr Cotten faked his own death and will live in hiding while siphoning off funds from the exchange’s digital vaults.

Gerald Cotten’s widow, Jennifer Robertson, says she is being hounded by continuous claims on social media that her husband has faked his own death in an elaborate hoax.