OSC Brands Defunct QuadrigaCX as “Old-fashioned Fraud” Wrapped In New Tech

Following the death of QuadrigaCX exchange founder, Gerald Colten that resulted in crypto investors losing over $190 million worth of cryptocurrency, Canadian financial watchdog, the Ontario Securities Commission (OSC) has published an investigative report on the case.  

According to the 33-page report by the Enforcement Branch Staff of the OSC today, the commission had conducted a 10-month research to determine the activities of the exchange during the period of its existence. 

Contrary to the widespread report that Colten purportedly held the private keys to the company’s cold storage wallet with investor’s $190 million funds in it, the OSC alleged that the founder embezzled a larger part of investors’ funds over the cause of the exchange existence.

The OSC stated that approximately $115 million of the total sum was lost due to Colten’s fraudulent trading on the platform. 

The exchange founder subsequently lost an additional $28 million while trading on three other exchanges, and an undisclosed amount was spent on his extravagant lifestyle, the commission added. 

QuadrigaCX was a fraud

Describing the exchange’s mode of operation, the OSC noted that QuadrigaCX was just another “old-fashioned fraud wrapped in modern technology,” as the firm was using new investors’ deposits to fund other clients’ withdrawal in its last month.   

Colten created several accounts with fake details and balances, which he used to trade with unsuspecting investors. 

During the course of his actions, he sustained real losses due to market price fluctuations, thus leading to a shortage of assets to meet investors’ withdrawal needs.  

Notably, he made up for his fraudulent deeds with other investors’ deposits, hence running the exchange like a Ponzi scheme. 

The OSC stated that the fact QuadrigaCX did not register with the appropriate regulators resulted in Colten’s misappropriation of investors’ funds over a long period. 

The QuadrigaCX saga

QuadrigaCX had been in the news since last year when the exchange’s CEO was pronounced dead during a trip in India. 

At the time, it was reported that Colten was the only one who had access to the private keys of the exchange’s cold storage. 

Several efforts were made to retrieve the keys but proved abortive, including Kraken’s announcement of $100,000 cash reward to anyone who provides information that leads to the discovery of the private keys.