Ernst & Young Inc. (EY), the advisory service appointed to be QuadrigaCX's monitor after the Canadian exchange was granted creditor protection last week, has released its first report detailing the progress that has been made since the February 5 Nova Scotia Supreme court hearing. If you're not sitting down, I'd find a chair, because against all odds, Gerry Cotten, the exchange's dead owner, just got nearly 500,000 Canadian dollars (CAD) richer.
If you know anything about the QuadrigaCX saga, then you know that the exchange cannot currently access an excess of $180 million in cryptocurrency (it says) it holds in cold storage on Cotten's encrypted laptop. When Cotten passed away in India in December 2018, he unfortunately took the password to his laptop with him. That $180 million is meant to go toward paying back the $250 million the exchange owes to users in cash and cryptocurrency obligations.
According to EY's report, the monitor was told by QuadrigaCX that the exchange held the equivalent of CAD$902,743 worth of various cryptocurrencies in its hot wallets. The holdings included 154 bitcoin, .014 bitcoin cash SV, 33 bitcoin cash, 2,032 bitcoin gold, 822 Litecoin, and 951 Ether.
However, on February 6, – the day after the exchange was given 30 days to find a way into their cold wallets – 103 of the 154 bitcoins stored in hot wallets were "inadvertently transferred … to Quadriga cold wallets which the Company is currently unable to access." In other words, approximately CAD$468,675 worth of bitcoin was accidentally moved to the inaccessible cold wallet supposedly controlled by the deceased owner.
Let me just give you a second to let that sink in.
All right. Back to the rest of the report.
EY states that the remaining hot wallet cryptocurrencies, including the 51 leftover bitcoins, have been moved into a cold wallet which will be maintained by the monitor, pending further orders from the Nova Scotia Supreme Court.
EY has also taken control of various electronic devices that were owned by Cotten. This includes two active laptops, two "older model" laptops, two active cellphones, two dead cellphones, and three encrypted USB keys. The devices are being held in a safety deposit box rented by EY.
At the end of last week, Reuters reported that the British Columbia Securities Commission, the province's securities regulator, would not be investigating the QuadrigaCX situation as the authority did not believe the exchange was trading in securities. The very next day, Reuters reported that the Ontario Securities Commission would be "looking into" the QuadrigaCX situation, but whether or not it would turn into a full investigation was unclear.