More than a year after its inception, the QuadrigaCX case appears to be on the rebound. Following an investigation by regulators in the province of Ontario, the QuadrigaCX platform was found to work like a Ponzi scheme.
The most surprising news item in crypto
In February 2019, the Canadian exchange platform QuadrigaCX shook the crypto sphere through a morbid affair.
Following the death of its CEO, the company was unable to access user funds. Indeed, the late Gerald Cotten had taken with him the private keys of the various exchange wallets. Outcome: $ 145 million in forever frozen crypto assets.
The story could have ended there, but it didn't! Indeed, following various surveys, it quickly became clear that the QuadrigaCX platform did not have ordinary management. The CEO even went so far as to use user funds to finance his lifestyle and trade in the crypto markets.
Ontario Calls Quadriga Ponzi
With 40% of the users being residents of the state of Ontario in Canada, it seemed logical the local authorities would take up the matter.
This is how the Ontario Securities Commission released a report on the trading platform. This report summarizes all the research gathered by regulators. The latter combine data from 368,000 customers and a reconstruction of the platform’s financial history, thanks to the archives of third-party companies.
This report highlights the illegal use of Gerald Cotten's user funds. Indeed, in addition to using them for personal purposes, user funds have been used to pay for withdrawals by other users following the fall in the price of cryptocurrencies.
Who says users pay for other users, says Ponzi scheme. This is what the report decreed by ruling:
"He was exploiting Quadriga as a Ponzi scheme, in the sense that part of customer withdrawals was funded by deposits from other customers. "
Due to the death of the principal and the bankruptcy of the platform, the State of Ontario cannot continue legal proceedings, as the report concludes:
"CSO staff would likely have sued Cotten and Quadriga. However, this is not practical, since Cotten died and Quadriga is bankrupt, its assets being subject to a court-supervised distribution process. "
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