- More than $145 million worth of crypto is locked in cold storage with owners unable to access the assets.
- There has been widespread speculation that Cotten faked his death to make away with clients’ investments.
The recent disappearance of South African brothers Ameer and Raees Cajee of Africrypt exchange with 69,000 BTC is just one of many crypto “exit scams”. As can be expected, the increase in mainstream interest in digital assets has brought with it scammers hoping to profit off the naive and in some cases, the not-so-naive.
One of the best-known ‘alleged’ exit scams was the sudden death of Gerald Cotten, founder of the Canadian crypto exchange QuadrigaCX. Cotten’s death, according to official records was on December 9, 2018. The cause of death was revealed to be complications arising from his years-long struggle with Crohn’s disease. The CEO died while on his honeymoon in India.
The company did not announce this to the public until about a month later. It was revealed that with his death, access to the company’s cold storage wallets and conversely $145 million in investor crypto was lost. The firm then froze withdrawals and went on to enter bankruptcy proceedings in April of 2019. It owed around 76,000 investors.
Naturally, this news did not sit well with clients and the media. Further investigation into Gerald Cotten revealed a shady past that sparked widespread speculation that the CEO had faked his death and made away with investors’ money.
Gerald Cotten’s death: an exit scam?
The Royal Canadian Mounted Police and Federal Bureau of Investigation (FBI) opened an investigation into the matter. One online publication dubbed his death “crypto’s biggest mystery”. Some speculated Cotten had faked his death in order to rob his clients of their investments. Some investors have gone as far as asking that his body be exhumed to prove his death.
They point to various signs like the fact that his will was signed just two weeks before the couple left for their honeymoon. Cotten, who it was revealed had been using the money clients entrusted onto his company to invest on luxuries such as flying on private jets and yachts, had left his two dogs $100,000 each as an inheritance. His wife, Jennifer Robertson, was named as the executor of his $9 million estate. She has however denied knowing anything about Cotten’s business dealings and returned the $9 million to the company to help refund clients.
Another irregularity was the fact that only he had complete access to the company’s funds. It has since been revealed that Cotten would use fake accounts under the alias “Chris Markay” to make fake Bitcoin purchases for his clients. Accounting firm Ernst and Young says he would then use this crypto to make investments elsewhere for himself.
Police have come to the conclusion that QuadrigoCX was simply a large Ponzi scheme. Investigator Amy Castor revealed that Cotten had been carrying out such schemes since he was a teenager. It is believed that he had been involved in the pre-crypto virtual token eGold. It does not help his case that QuadrigoCX’s co-founder Michael Patryn was in fact, an individual whose real name was Omar Dhanani and had been convicted of identity fraud in the United States.
Investigations are still ongoing, with calls to exhume his body still yet to clear the legal process. A total of $46 million has been recovered – $34 million from the company and $12 million from his assets. The rest remains inaccessible.