QuadrigaCX Co-Founder Used User Deposits For His Own Trading

The owner of the now defunct cryptocurrency exchange from Canada, QuadrigaCX, was allegedly transferring user funds outside of the exchange and using them as security for his own margin trading on other platforms. The latest cryptocurrency news show that the QuadrigaCX co-founder was reported in the fifth report on a court monitor from Ernst & Young (EY) filed on June 19 with the Supreme Court of Nova Scotia.

Meanwhile, EY has outlined its principal concerns in relation to the exchange. They noted that its operations were “significantly flawed from a financial reporting and operational control perspective.”

In addition to this, many best cryptocurrency news sites reported that the activities were directed by a single individual which is the now deceased QuadrigaCX co-founder Gerald Cotton. EY noted that there was neither segregation between duties and basic internal controls – nor any segregation of assets between QuadrigaCX’s and other user funds.

EY also added that Quadriga did not have any visibility regarding its profits or profitability in general. As the report cites, user crypto was not exclusively maintained in the exchange’s wallets.

“Significant volumes of Cryptocurrency were transferred off Platform outside Quadriga to competitor exchanges into personal accounts controlled by Mr. Cotten. It appears that User Cryptocurrency was traded on these exchanges and in some circumstances used as security for a margin trading account established by Mr. Cotten.”

In addition to this, the coming altcoin news show that QuadrigaCX co-founder Cotton apparently created fake “identified” accounts on the exchange under multiple aliases “into which unsupported Deposits were deposited and used to trade within the platform.” This, as EY noted, led to “inflated revenue figures, artificial trades with Users and ultimately the withdrawal of Cryptocurrency deposited by Users.”

In his trading on the competitor exchanges, EY noted that the QuadrigaCX co-founder incurred trading losses and incremental fees that affected Quadriga’s cryptocurrency reserves. The report also cites EY saying that it has been unable to confirm the identity of wallet holders to which substantial sums of crypto were transferred. As of the filing date, around 76,000 users are owed a combination of fiat and crypto by Quadriga, at an aggregate value of around $214.6 Canadian dollars (equivalent to $162.2 million in USD).