QuadrigaCX Exchange’s founder, Gerald Cotten, passed away more than two months ago, and with his death, the keys to the exchange’s cold storage allegedly went to the grave with him.This is the story that QuadrigaCX is sticking to in the posthumous mess that has followed its founder’s death. The situation has been likened to a second Mt. Gox, with some of the biggest differences being that we don’t know whether or not QuadrigaCX is solvent and there’s no hard evidence of foul play on behalf of the exchange. But there are also more questions than answers, and lack of hard evidence or transparency in the situation (including, whether or not there are cold wallets and whether or not QuadrigaCX is being honest about not having access to them) is the exchange’s closest resemblance to Mt. Gox: no one’s completely sure of what happened and what’s going on.This has led media, social media commentators and other community voices to see the facts of the case through different lenses. Some have argued that QuadrigaCX has no cold wallets, others have said they must be lying about not having access to these funds. One bold camp has even called the likelihood of Cotten’s death into question. This conspiracy is tenuous, as death certificates are public (even if Cotten’s name is misspelled as “Cottan” on the certificate, likely an honest mistake made by crossing the language barrier); Globe and Mail reporters even traveled to Jaipur and spoke with doctors who verified his death.Those doctors, the accounts recall, also signaled that Cotten’s death was unconventional, as was how the body was handled — but more on that later.QuadrigaCX would keep Cotten’s death from the public and its clients for about a month, enough time for his widow, Jennifer Robertson, to transfer the contents of her husband’s estate as set out in his will — a document updated two weeks prior to his death — into her name. All the while, customers complained about their perpetual struggle to withdraw cash and coins from the exchange. It has since ceased operations due to its self-proclaimed inability to access cold wallets to address these liquidity issues.Plenty of affected users think the funds are gone and the wallets don’t exist, and evidence — some hard, some soft — is piling up to suggest that there’s something amiss with how things stand now.After corresponding with multiple persons who either knew Cotten well, were QuadrigaCX customers or who were associated with the exchange’s business, Bitcoin Magazine learned that questions have surrounded QuadrigaCX's operations for some time — enough to warrant skepticism about the story it’s been presenting.This account will give an overview of what we know so far. It attempts to be thorough but not exhaustive and to treat conspiracies with skepticism while not ignoring them.Trouble BrewingGerald Cotten died unexpectedly on December 9, 2018, while vacationing in India. His sudden death has been framed as the culmination of Cotten’s seven-year battle with Crohn’s disease, though Cotten’s death at the age of 30 is rare for people with the disease. He passed away while under care at Fortis Escorts Hospital in Jaipur, India, where he was reportedly honeymooning with his newly wedded wife, Jennifer Robertson, when he had some extreme gastrointestinal pain.Though Dr. Sharma originally diagnosed traveler’s diarrhea on Cotten’s first visit to the hospital, Cotten’s condition quickly deteriorated. Twenty-four hours later, after being readmitted, Cotten died of cardiac arrest induced by septic shock when his intestines were perforated, the death report notes.The doctor told the Globe and Mail that Cotten’s death was “medically unusual,” particularly the way his condition dramatically worsened so rapidly. He and his staff are even a bit “[unsure] about the diagnosis.”No autopsy was performed, and the apparent mysteries surrounding Cotten’s death become more complicated as he was prepped for burial. Dr Semmi Mehra, an embalming specialist at Mahatma Gandhi Medical College & Hospital, whom Robertson attempted to employ for Cotten’s embalming, refused because the body came from the hotel the couple were honeymooning at instead of from the hospital where Cotten passed.“That guy told me the body will come from the hotel. I said: ‘Why the hotel? I’m not taking any body from the hotel, it should come from Fortis’,” Dr. Mehra told the Globe and Mail.She would direct them to a public medical college in the area who would ultimately embalm the deceased crypto tycoon, the Globe and Mail reports.Cotten’s death left the company’s leadership without a clear successor, as Cotten left no directions for appointing a new CEO, an oversight that complicates the exchange’s apparent inability to access cold wallet funds. An emergency shareholder meeting was called on January 25, 2019, to appoint new directors. The meeting resulted in Jennifer Robertson, her stepfather Thomas Beazley and Jack Martel being elected to the board. The meeting supposedly took place over a conference call, according to a conversation Bitcoin Magazine had with Michael Patryn, the exchange’s co-founder who claims to have distanced himself from the exchange since March 2016.Two sources who knew Cotten told Bitcoin Magazine that they were shocked to hear that Cotten hadn’t put contingency plans in place for his sudden passing, saying that this was out of character for a man who always had security at the forefront of his mind.“This is the part that gets a little bit hairy,” Michael Perklin, ShapeShift CISO, told Bitcoin Magazine. “For a business to operate for six years and not have a business continuity plan? That’s reckless. I was incredibly shocked to learn that they couldn’t access the wallet. Gerry was a very smart man. It was inconsistent with his personality to not have a backup if he was hit by a bus. We’re definitely missing important pieces of this,”He added, “Gerry updated his will two weeks before his death. That proves that he is thinking about these things.”QuadrigaCX waited more than a month to make Cotten’s death public, and they waited longer still to admit that the company was having trouble mustering up the liquidity to honor withdrawals.By the time the exchange shut down, Jennifer Robertson had gone through probate to transfer the assets in Cotten’s estate to her name. During this in-between period, she listed (and allegedly sold) Cotten’s sailboat/yacht and placed four properties in a trust called the Seaglass Trust, reportedly taking out a second mortgage on two of these. One of these properties, Cotten and Robertson’s former home at 71 Kinross Court, Nova Scotia, has been sold, while another property in Kelowna, British Columbia, has also been sold, an anonymous source told Bitcoin Magazine.Liquidity IssuesBefore Cotten’s death, users embattled in months-long withdrawal issues aggravated the exchange’s reputation and troubled history. Even as early as March 2018, bad press plagued the exchange for a delayed withdrawal of over $100,000. This issue could be the consequence of the exchange’s tenuous relationship with its Canadian banking partners, a struggle that culminated in November 2018 as the Canadian Supreme Court ruled to take control of $21.6 million after the Canadian Imperial Bank of Commerce (CIBC) froze accounts related to QuadrigaCX's business. It also lost a not-insignificant sum of ether to a smart contract bug in June of 2017, worth $17 million CAD at the time.QuadrigaCX's banking difficulties have been a recurring theme in the exchange’s five-year history, according to multiple Bitcoin Magazine sources, all of whom asked to remain anonymous due to the sensitivity of the ongoing case.One long-time QuadrigaCX user filed a ticket on August 14, 2018, after attempting to withdraw cash in late July. QuadrigaCX support’s initial reply oddly claims, “Both have been processed and arrive in a few years [sic].” After the user continued to complain about not receiving their funds, a follow-up email stated, “There is no issue, just ongoing issues … with the banks,” — the exchange’s familiar mantra in response to withdrawal issues.After going round-for-round over email with QuadrigaCX support for weeks, this customer received his funds nearly two months after he requested them and a month after he opened a support ticket.This experience seems par for the course, as another user complained that withdrawal requests for himself and others have been marked as complete after a similar, month-long, back-and-forth exchange with QuadrigaCX, but the funds have still not been deposited into their accounts.“They stopped replying to my emails after January 11,” this user told Bitcoin Magazine. He said that he’d initiated a withdrawal request on December 8, 2018, which was marked as completed on December 22, 2018, despite no funds hitting the user’s bank account. This particular individual has $2,000 tied up. We’ve spoken to an individual with a similar experience who is missing $1,100 and another who has lost more than $1 million CAD after failing to have withdrawals satisfied.Michael Perklin said that QuadrigaCX has had banking troubles “[ever] since day one.”“I know how very difficult it was to get a banking relationship,” he said in reference to the stubborn nature with which Canadian banks treat corporate accounts with cryptocurrency companies.Continuing, Perklin said that "any companies that dealt with cryptocurrencies in Canada, like QCX, faced huge problems opening and maintaining bank accounts. QCX rotated through multiple bank accounts for years to stay ahead of the account closures. While this may have seemed shady, it was the only way for QCX to continue serving customers."A Canadian business strategies and best-practice professional, who asked to remain anonymous, also attested to Bitcoin Magazine that QuadrigaCX’s relationships with banks were a stressed and constant “struggle.” They even introduced Cotten and QuadrigaCX to a potential banking partner, but, after the company failed to provide “beneficial ownership information,” the bank refused to do business with the exchange (QuadrigaCX’s failure to provide this information, the source said, may have to do with the connections between Michael Patryn and ex-con Omar Dhanani, something we’ll go over more in the “Loose Ends” section of this article).These issues, the source believes, are a plausible reason behind QuadrigaCX’s multiple shell companies (QuadrigaCX Fintech Solutions Corporation and Whiteside Capital Corporation).The death of the exchange’s CEO seems to have either exacerbated these banking problems or exposed them to the public more thoroughly. And while Perklin called QuadrigaCX ’s money transfer issues unsurprising, some aspects of the exchange’s withdrawal process were anything but — specifically, offering hard cash withdrawals in the mail or in-person as a preferable option.Multiple clients have reported receiving thousands of dollars via Canada Post. Speaking to a few of these users, Bitcoin Magazine verified these reports: One of these individuals told us that, while the three packages they received listed QuadrigaCX, Vancouver, as the return address, Canada Post’s tracking information lists the packages’ origin as Richmond, British Columbia; Calgary, Alberta; and Sherwood Park, Alberta.Besides using Canada Post, QuadrigaCX offered hard cash withdrawals via in-person pickups. This practice, while not totally unheard of in the cryptocurrency industry, is virtually non-existent for retail exchanges (Coinsquare, one of the only legitimate exchanges to have offered it, no longer does). More than just unconventional, the makeshift, lax nature with which the exchange went about processing these withdrawals is suspect.One of Bitcoin Magazine’s sources recalled driving six and a half hours to the Laval pickup location in late January, after “getting the runaround” since November, wherein each attempt to transfer cash ended in its being processed and cancelled. This process went on for weeks; the client even attempted to transfer the money into ether to withdraw to another exchange but hit the same dead end. When the users tried to get answers, their queries were met by silence on social media, support tickets and calls to QuadrigaCX's offices.“We had enough after Christmas and chose to pick up our cash at the location in Laval. They sent us an email confirming it was processed and would be available on Jan 21 at 10am,” the source explained. “We drove 6.5 hours to that location, only to find a nonexistent office suite with a mailbox drop there. No person. No one in the building knew of that company either. We called and left messages on that number provided and drove home. He finally called us a week later saying QuadrigaCX wasn't giving him the cash to hand out but if they did give him our cash (they were supposed to give him 5k) he would reserve our amount out of that and text us to come pick it up. Two days later he texted us and said they aren't giving him the money and he will be in touch.”That was the last time they heard from QuadrigaCX’s cash lackey, who, judging by his responses, had little connection to the exchange besides being an intermediary for cash payments. Days later, the exchange would announce Gerry’s death and its likely insolvency.As noted earlier, QuadrigaCX’s banking relationships were non-existent, and Robertson admits in her affidavit that the exchange “had no corporate bank accounts.” Cash would likely be hard to come by for an exchange with no corporate account with a licensed bank or fiduciary partner. Instead, the exchange had to rely on a patchwork banking system which consisted of nine or so payment processors, including the Canadian-based Bylls and Billerfy.Billerfy CEO Jose Reyes was involved in the November 2018 proceedings that ended in the Canadian Supreme Court freezing $25 million CAD tied to the exchange’s business. According to court documents, he had three personal accounts frozen along with two corporate accounts for Costodian Inc., another payment processor QuadrigaCX used for its business, for which Reyes is the sole director and officer. Reyes had transferred some $1 or 2 million CAD to his personal account from Costodian’s corporate accounts, making it unclear to the court as to the ownership of the millions in deposits from 388 users.“CIBC has not been able to determine to what extent the Depositors, Costodian, Reyes, QuadrigaCX and/or Billerfy Labs Inc. (“Billerfy”) are entitled to the Disputed Funds,” the court order states.The $25 million is still stuck in limbo, along with $5 million more in CAD that the exchange holds in bank notes for funds held by other payment processors. Ernst & Young (EY), as monitor over the legal proceedings, has contacted the processors to collect this debt. In its second report, the monitor revealed that it had received $20 million in bank draft notes from Costodian, though it must wait for the approval of the Royal Bank of Canada (RBC) to clear wires for the bank drafts to be deposited into a disbursement account that the monitor oversees.In its second report, EY also indicated that Robertson and QuadrigaCX ’s litigation coffers are running low, insinuating that they are not far off from running out of funds entirely. If the RBC clears the bank draft wires into the disbursement account, this will keep the exchange’s legal operations afloat amidst the courtroom proceedings and restructuring.Entering the CourtroomAfter going offline on January 28, 2019, for reported maintenance, the exchange came out publicly to say that it did not have access to its cold storage, as Cotten had been the sole guardian of the wallet’s keys. In a sworn affidavit filing with the Nova Scotia Supreme Court, Cotten’s widow Jennifer Robertson said that the funds are likely lost.“QuadrigaCX's inventory of cryptocurrency has become unavailable and some of it may be lost.”On February 5, 2019, the exchange filed for creditor protection with the Nova Scotia Supreme Court. EY was appointed as monitor over the case, giving the firm legal rights to oversee a compensation account for QuadrigaCX users as well as monitor the exchange’s current cryptocurrency balances and any hardware that may contain company information (namely, keys/seeds for the alleged cold storage).In its first report as legal monitor, EY reported that it had begun funding the debtors’ compensation account with $150,000 CAD which Robertson supplied out of her own personal finance. More notably, the firm reported that QuadrigaCX “inadvertently” sent some $460,000 CAD worth of bitcoin to the cold wallets its employees reportedly can’t access. Perhaps in response to this blunder, the firm has taken control of QuadrigaCX's remaining hot wallet funds, as well as the funds that were accidentally transferred, and placed them in their own cold storage, the monitor’s second report reveals.As with other exchange scandals in the industry, it didn’t take long for QuadrigaCX to rack up an adversarial list of investor-led reclamation suits. With funds for more than 100,000 users so far unaccounted for, Canada’s premier law firms lined up to represent the thousands who have come forth to challenge the company in court. These lawyers had a court date on February 14, 2019, to determine who would win the right to represent aggrieved clients in the legal proceedings looming ahead.After delaying the decision a week due to the strength of the competing firms, presiding Nova Scotia Court Justice Wood ultimately gave the bid to Miller Thompson and Cox & Palmer for its apparent expertise with the Companies’ Creditors Arrangement Act (CCAA), a piece of Canadian litigation that affects insolvency cases, and digital assets.“Miller Thompson has additional depth in certain areas, including larger CCAA proceedings and cryptocurrency … The relationship between the two firms has been thought out carefully with a view to minimizing costs. Cox & Palmer will deal with their areas of expertise, including local litigation practice and court appearances. Miller Thompson will provide expertise in dealing with large creditor groups and cryptocurrency technology,” the judge wrote in a court order.The case will re-enter the legal arena on February 22 for the next round of proceedings.Where’d the Funds Go?QuadrigaCX claims that the funds are inaccessible, but some creditors and blockchain professionals alike are starting to think the funds aren’t actually there.For starters, QuadrigaCX has refused to attest to their cold storage reserves by making the public address for these wallets public. One Reddit user, dekoze, claims to have tracked funds from a hot wallet address listed in Robertson’s affidavit to five wallets that could constitute part of the exchange’s cold wallets. These wallets recently had 104.365 BTC sent and split between them, an amount nearly on par with the 103 BTC that QuadrigaCX “inadvertently” sent to its cold wallets on February 6, 2019.Other blockchain transaction analysis suggests that QuadrigaCX has been cycling funds through competing exchanges, and they’ve also found little evidence that any cold wallet reserves exist.James Edward (@ProofofResearch) first dropped this bombshell. Taking deposit addresses provided by QuadrigaCX customers, his transaction analysis of the Bitcoin blockchain found no trace of cold wallet reserves. Instead, it found a dizzying trail of transactions to and from popular exchanges like Kraken, Bitfinex and Poloniex, something he reinforced with later research using the wallets unearthed by dekoze (which Edward, in this newest research, actively disputes are cold wallets).Taylor Monahan, the CEO of Ethereum wallet MyCrypto, corroborated Edward’s findings with her own analysis of the Ethereum blockchain. Like Edward, she found no convincing evidence that QuadrigaCX operated with cold wallet storage, and she also followed a tortuous trail of transactions that led to other exchanges like Bitfinex and, most notably, ShapeShift.“It’s just bizarre,” she told Bitcoin Magazine.“Totally hypothetical, it’s possible that QuadrigaCX has some hidden cold storage somewhere if, and only if, instead of going between a hot and cold wallet, they went directly from user deposit addresses to the cold wallet. Now, I went through their transactions for over three years, and it’s very hard for me to imagine that … with all the practices I’ve seen and how they operate and how often they move funds that they have a mechanism to put funds into the cold wallet that no one noticed.”Hidden or not, she’s not convinced that the cold wallets are there, though, because she only found one instance of a cold wallet holding some 4,000 ether for more than a year, after which portions of these funds were sent to hot wallets for QuadrigaCX or competing exchanges. For the rest of the wallets that Monahan tracked, she believes that QuadrigaCX could have been market making to improve the appearance of exchange liquidity.“This would mean having to source coins from an external source in order to fulfil withdraw requests because they’re playing with their own money,” she qualified. “Even if that’s the case, I cannot imagine why they would exchange ether through ShapeShift. This was something they did consistently over the years.”Now, an exchange sending funds to another exchange isn’t anything new; exchange-to-exchange arbitrage and inter-trade is common in the industry. But QuadrigaCX ’s activity doesn’t make much sense, Monahan told Bitcoin Magazine, especially the millions in ether that was sent to ShapeShift, which charges higher fees than other exchanges for the convenience of instant cryptocurrency swaps.The movement of funds could be customers depositing of their own volition, something that Monahan takes into account in her analysis. She says that those withdrawals are likely denoted by multi-numerical values, while funds QuadrigaCX was sending itself may be represented by rounded off numbers.“When you look deeply into how an operation does something … everyone has their little quirks. For Quadriga, for example, they love to send exact amounts.”The rationale for cycling funds through different exchanges amounts to a fractional reserve system, the same practice banks use today to shuffle credit. Basically, if QuadrigaCX did not have enough in their wallets to cover a massive withdrawal in bitcoin, they would send ether to something like ShapeShift to convert these funds to bitcoin to honor the withdrawal.Coinbase CEO Brian Armstrong believes this is the most likely scenario. In a Twitter thread, citing the exchange’s own internal transaction analysis, he speculates,“Patterns of sends from cold storage suggest they tried keeping [the] exchange afloat, and maybe attempted to trade their way out of a hole” — a hole that was in part dug by the exchange losing roughly 67,000 ether to a contract bug. That was in June 2017, after which time the exchange began draining their “cold wallets,” Armstrong holds.Couple this with the 2018 bear market and you have a solvency crisis.“This implies that at least a few people inside QuadrigaCX knew that they were running fractional. If so, then it's possible that untimely death of their CEO was used as an outlet to let the company sink,” he concludes.In our conversation, Monahan noted decreasing transaction volumes following 2017, something that could either be attributed to Armstrong’s conclusion or to the anemic nature of the market in the bearish slump that began in 2018.“You can definitely tell that the amount of money being moved around was very high in 2017 and has been dwindling, and previous to 2017, you see less activity. Whether that indicates something on QuadrigaCX's end is hard to say because every exchange is going through this [after the 2017 bull run].”When asked about the strength of such transaction analyses, Perklin cautioned that “the only way to get a map of all of QCX movements would be to get all the deposit addresses.”Loose Ends and Conspiracy TheoriesFor all that we do know about QuadrigaCX, there’s also plenty we don’t know — as well as lots of unsettling middle ground between the two.Take, for instance, that a multitude of users who report receiving payroll deposits from RNC Inc., a company believed to be Robertson Nova Management Inc., a real estate management company registered in Robertson’s name. In the reply-to lines of emails confirming these deposits are listed one of two emails tied to Robertson. These deposits contradict Robertson’s sworn affidavit that she was not involved in the company’s business when Cotten was alive.Questions also loom over the identity of Michael Patryn, QuadrigaCX ’s co-founder, who told Bitcoin Magazine that he cut ties with QuadrigaCX in March 2016. He left amidst a wider company exodus which gutted the shareholders sitting on the company’s board of directors. These directors, Patryn claimed, were upset with Cotten’s decision not to take the company public on the Canada Stock Exchange, a promise he made a year prior in 2015 which helped lead to the company raising $850,000 CAD in a private fundraising round. That same year, the exchange published its last financial audit, posting revenues of barely $80,000 CAD.Patryn, who owns roughly 17 percent of the company’s shares, bought many of the shares off these individuals because “he wanted to make things right,” claiming that many of these shareholders were personal friends and invested because they “trusted” him.Meanwhile, some skeptics don’t trust that Patryn is being honest about his identity. Critics and internet sleuths have argued that "Michael Patryn" is an alias for "Omar Dhanani," an ex-con from California who was pegged for identity theft and fraud in 2004 after a sweeping bust of members involved in the cybercrime syndicate ShadowCrew. Omar Dhanani allegedly began using the alias Omar Patryn in 2005, according to a forfeiture case, and he was deported back to Canada in 2008.The connections between Michael and Omar rest on the shared surname, as well as the presence of Dhanani’s relative, Nazmin Dhanani, on a company filing for MPD advertising that Michael Patryn made in 2009. Michael Patryn would start the Midas Gold Exchange, an online e-currency exchange that had ties with the Liberty Reserve in 2009, a private e-currency enterprise that was shuttered in 2013 by U.S. officials for money laundering and whose founder was sentenced to 20 years in federal prison. Midas Gold racked up a notorious reputation for fraudulent activity during its short lifespan.The conspiratorial web connecting Omar/Michael is documented elsewhere, so we won’t indulge it any further here. If the connections hold true, though, it paints a poor picture for the moral constitution of at least one of the company's founding members.And it could explain the suspicious structure of the company’s operations. Amber Scott, the founder of Canadian Outlier Solutions, an anti-money laundering consulting firm, told Bitcoin Magazine, “QuadrigaCX was always ‘outside of my risk tolerance.’ Like many others in the community, I'm left wondering what I could have done differently to warn people when I saw red flags.”A look into the company’s structure would be enough to give one pause. In her affidavit, Robertson revealed that, after 2016, “most of the business … was being conducted by Gerry wherever he and his computer were located.” The rest of the company’s employment base consisted of seven contractors, one of which, Alex Hanin, acted as the exchange’s sole developer, while the rest were a mixture of customer service representatives, social media managers and client verification employees.One of these alleged employees hosted an AMA on the QuadrigaCX subreddit, which has since been deleted after the contractor reported that he was facing legal action from Jennifer Robertson’s legal council. Among other unverified claims, he alleged that QuadrigaCX was fraudulent from the start and that Jennifer and Gerry’s involvement from 2016 onward should be the chief area of concern for investigators, insinuating that Patryn and Lovie Horner, Patryn’s supposed partner, are no more than red herrings.To attest to the veracity of his insider status, the contractor posted screenshots of the company’s Rocket Chat, as well as a photo of the funeral pamphlets used for Cotten’s funeral. Community members immediately raised questions as to why JA Snow Funeral Home, who hosted the burial, was misspelled as JS Snow on the pamphlet (though this could feasibly be a typo given the placement of “a” and “s” on a QWERTY keyboard).A source with a computer science background shared a metadata analysis of the image provided with Bitcoin Magazine, pinpointing the photo to a Halifax airport IP on the day following the funeral.The source clarified that "the location was purely a long/lat that the iPhone's software embeds into the photo. The guy could've been using a VPN from [anywhere] and it would still say the pic was taken in the Halifax airport. He could take the photo with no internet connection and it would be tagged by the phone's GPS."This IP tracking and the contractor’s testament is not conclusively hard evidence of foul play, but the threat of legal action and the deletion of the AMA and the contractor’s Reddit account adds to the pile of questions surrounding the case.As legal proceedings progress, we will update this article with further information.Reporter Jessie Willms contributed additional notes and research to this story. This article originally appeared on Bitcoin Magazine.