The latest report from the monitor appointed to the QuadrigaCX case has revealed that CEO Gerald Cotten did not segregate customer funds from the exchange’s funds and was attempting to move all funds over to other exchanges.
Earlier this year, the CEO of Canadian-based cryptocurrency exchange QuadrigaCX passed away, locking up $190 million worth of customer funds.
Gerald Cotten was reportedly the only person who had access to the private keys which could free the customer funds.
The latest report states that activities were largely directed by Mr Cotten and typical segregation duties and basic internal controls did not appear to exist.
“No accounting records have been identified by the monitor and there appears to have been no segregation of assets between Quadriga funds and User funds. Funds received from and held by Quadriga on behalf of Users appear to have been used by Quadriga for a number of purposes other than to fund User withdrawals,” it claims.
Previous reports have claimed the funds did not appear to be held in either the hot or cold wallets owned by Quadriga.
This new report now confirms that the reason the wallets were empty is because the funds were instead being moved to other exchanges.
It states: “Significant volumes of cryptocurrency were transferred off platform outside Quadriga to competitor exchanges into personal accounts controlled by Mr Cotten. It appears User cryptocurrency was traded on these exchanges and in some circumstances used as a security for a margin trading account established by Mr Cotten.”
Reportedly, trading losses and incremental fees charged by these exchanges appear to have adversely affected Quadriga’s cryptocurrency reserves.
Gerald Cotten allegedly also created accounts under aliases where it appears that unsupported deposits were used to trade on the Quadriga platform resulting in inflated revenue figures, artificial trades with users, and ultimately the withdrawal of cryptocurrency deposited by users.
Substantial funds were also reportedly transferred to Cotten personally and other related parties. The monitor has so far not found any supporting evidence justifying the transactions.
Missed the ongoing QuadrigaCX saga? Discover more about how five out of six cold wallets were found to be ’empty’.