Quadriga CX CEO Spent User Funds on Margin Trades
The Supreme Court of Nova Scotia has revealed that users’ cryptocurrency funds were not maintained exclusively in Quadriga CX’s cold and hot wallets, but also on other exchanges and platforms. The now deceased CEO, Gerald Cotton, also used these funds to margin trade in his accounts, as per a court filing, June 19, 2019.
New Developments in Quadriga Case
The investigation into the Quadriga CX fraud has revealed discerning information enraging users that used the now-defunct platform.
The infrastructure seems to be significantly flawed from a financial reporting and operational perspective, and their internal controls were shabby at best considering the company’s inability to provide any substantive accounts or documentation.
Other than the lack of any bookkeeping standards, the company was unable to differentiate between user funds and Quadriga CX’s proprietary funds. The exchange was in the business of accepting cash deposits, but no such transactions can be confirmed to have legitimately reached the depositing user.
The exchange has been unable to provide any security details regarding cryptocurrency in inventory, bank accounts, and other wallet addresses, all of which is said to have been exclusively with Gerald Cotten. The corporate procedures show Quadriga CX and Cotten’s complete disregard for user safety in ensuring the bare minimum of corporate governance.
Cotten also created multiple accounts under several aliases to deposit money and trade using the platform to inflate revenue numbers artificially. A substantial portion of user funds was transferred from the exchange’s designated hot wallets to Cotten’s wallets.
Quadriga Was a Fraud All Along
The court findings help interested parties reach one particular inference: Quadriga was a fraudulent exchange all along, and they never intended to truly cater to the needs of their customers. The exchange’s corporate set up clearly shows their focus was to create an operation that helped enrich their CEO, Gerald Cotten.
Without financial reports, accounts, or any proper documentation that could support the statements made by the exchange, it is difficult to believe anything they say. All evidence points to a malfunctioning business that was set up with the intent to deceive.