A report by Ernst & Young revealed the CEO of the Canadian crypto exchange QuadrigaCX, Gerald Cotten whose death is the reason for $190 million of missing funds and a bankrupt company, had transferred user funds to his personal accounts to use them as security for margin trading.
In April, the Canadian cryptocurrency exchange declared bankruptcy. After Cotten had died, QuadrigaCX went offline as the company’s CEO had exclusive access to the wallets where the exchange’s funds were held.
The Nova Scotia Supreme Court granted Quadriga protection from their creditors, and Ernst & Young was hired to monitor the defunct crypto exchange in the creditor proceedings.
Now, after four months of investigation, EY has published its fifth report, revealing multiple incidents where Cotten had misappropriated Quadriga user funds.
“Funds received from and held by Quadriga on behalf of Users appear to have been used by Quadriga for a number of purposes other than to fund User withdrawals,” the report stated.
Instead of maintaining user funds exclusively in Quadriga’s hot and cold wallets, Cotten transferred large amounts of cryptocurrencies to the CEO’s personal accounts on competitor exchanges. According to EY, Cotten either exchanged the user funds or used them as collateral for his own margin trading activities.
Cotten’s misappropriation had negatively affected Quadriga’s reserves. Losses occurred due to the margin trading activity of the deceased CEO and the incremental fees charged by the competitor exchanges.
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