Pennies on the Dollar: Harmed Quadriga Investors to Receive Small Percentage of Funds Lost on Crypto Platform

Last week, EY Canada posted a status report on Quadriga – a Canada-based crypto exchange that fell into chaos after the founder died, leaving keys to accounts missing and many questions. It was eventually determined that over CAD $300 million in assets were claimed by exchange users. Today, it looks like many of these investors will get some of their funds back – but, unfortunately, very little of impacted funds.

According to the document, CAD $39.5 million will be distributed to claimants or around 13% of the estimated value of claimed funds.

EY anticipates mailing the First Interim Distribution checks to each creditor if proof of claim has been established. There are thousands of accounts seeking compensation. Documents indicate there are 15 accounts that claim more than CAD $1 million at stake.

A report by the Ontario Securities Commission (OSC) described the Quadriga operation as a Ponzi scheme where the founder, Gerald Cotten, covered failed trading strategies with inbound deposits.

“Between May 2016 and January 2018, he transferred approximately $24 million of client funds to himself and [Jennifer] Robertson. This was despite the fact that Cotten’s salary was set at $65,000 per year according to his January 2015 employment agreement. Cotten bought a Tesla, a Lexus, a luxury yacht, a plane, a share in a private jet and multiple properties. Cotten and Robertson travelled frequently, and by mid-2018 Cotten boasted to another Quadriga contractor that “in total, I’m up to 56 countries… 37 with Jen”

The OSC said Cotten paid for a lavish lifestyle with investor funds. Quadriga grew slowly at first but as interest in crypto boomed, between 2016 and 2107, the crypto exchange grew 2000%.

 


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