After Gerald W. Cotten died last year, his clients at the cryptocurrency exchange Quadriga CX found themselves unable to gain access to at least $250 million in their accounts. The company’s operations were encrypted, and he was the only person who knew the passwords needed to move the funds, the company said.
Now, with law enforcement officials in two countries investigating potential wrongdoing at the firm, frustrated investors want definitive proof that Cotten is actually dead.
Lawyers appointed by the Supreme Court of Nova Scotia, where Quadriga is based, to represent its users asked Canadian law enforcement officials in a letter on Friday to exhume his body and conduct an autopsy “to confirm both its identity and the cause of death.”
They cited “the questionable circumstances surrounding Mr. Cotten’s death and the significant losses” suffered by his company’s investors, as well as “the need for certainty around the question of whether Mr. Cotten is in fact deceased.”
And time is of the essence, they said. The lawyers requested that the exhumation and autopsy be completed “by spring of 2020, given decomposition concerns.”
Asim Iqbal, one of the lawyers from the Toronto-based firm Miller Thomson, which is representing the investors, declined to comment on the request on Monday. Caroline Duval, a spokeswoman for the Royal Canadian Mounted Police, which received the letter, also declined to comment. She said an investigation into Quadriga was underway.
Cotten, who was 30 at the time of his death, co-founded the company, whose online exchange enabled trades of Bitcoin and other types of cryptocurrency, in 2013. His death — and Quadriga’s subsequent inability to pay its investors — drew both outrage and suspicion soon after the fallout of his passing became clear.
The firm announced his death on Jan. 14 in a Facebook post that said he had died more than a month earlier — on Dec. 9, 2018 — while traveling in India. The company said he died of complications from Crohn’s disease, an inflammatory bowel disease that is rarely fatal.
Quadriga’s platform went offline shortly after his death was announced, on Jan. 28, meaning users could no longer access their accounts. That led investors to vent their frustrations on sites like Reddit and Twitter, where a theory soon spread that Cotten may have faked his own death as part of a scheme.
Richard Niedermayer, a lawyer for Cotten’s widow, Jennifer Robertson, said in an email that she was “heartbroken to learn” of the request for his body to be exhumed. He said Cotten’s death “should not be in doubt.”
Quadriga’s platform had 363,000 users when it went offline, 115,000 of whom had balances in their accounts, according to court documents. Those balances added up to about $180 million in cryptocurrency and $70 million in Canadian currency. The largest single account was valued at roughly $70 million.
After Cotten died, Robertson, who was appointed a director of Quadriga, wrote in an affidavit that he had run the company from an encrypted laptop.
She said Quadriga could not pay its investors because she did not know the password or recovery key to open the laptop or access the funds and could not find them written down anywhere “despite repeated and diligent searches.”
She also said she hired an expert to search for the cryptocurrency in the company’s secure offline storage but that the search was unsuccessful.
In February, the Supreme Court of Nova Scotia appointed accounting firm Ernst & Young to examine the company’s finances and explore a possible sale. Niedermayer pointed to his client’s cooperation with that investigation in his email on Monday.
“While Ms. Robertson has assisted the Quadriga Affected Users in the recovery of assets, and has cooperated fully with Ernst & Young’s investigation, it is not clear how the exhumation or an autopsy to confirm the cause of Gerry’s death from complications arising from his Crohn’s disease would assist the asset recovery process further,” he wrote.
In early June, the FBI said it was conducting an investigation into the company in conjunction with the Internal Revenue Service, the US Attorney’s Office for the District of Columbia and the Justice Department’s Computer Crime and Intellectual Property Section.
A report from Ernst & Young, filed before the court shortly after the FBI announcement, raised further alarm. It said Quadriga did not appear to possess any “basic corporate records,” including accounting records.
More troubling, it said the firm had transferred “significant volumes of Cryptocurrency” into personal accounts held by Cotten on other online exchanges. It also documented the transfer of “substantial funds” to him personally that had no clear business justification.
Many of these improprieties appeared to have occurred because Cotten consolidated authority in himself, the auditors said. With him gone, the full story of Quadriga was difficult to understand.
“It appears that Quadriga failed to ensure adequate safeguard procedures were in place to transfer passwords and other critical operating data to other Quadriga representatives should a critical event materialize, (such as the death of key management personnel)” they wrote.