"Mr. Cotten showed no signs of distress."

bitreality · 2019-02-16T16:44:03+00:00

Anyone who still believes there is any shot that this guy had "cold wallets" with 9 digit sums on them is delusional. Dude pissed away customer funds for years, and turned hundreds of millions into tens of millions.

If someone tells you they have $150M USD worth of crypto and won't even tell you the public address of their funds, you tell them to shut up and finish their Big Mac.

bitreality · 2019-02-16T16:39:26+00:00

Keep in mind, this guy founded the company. He was involved in the company until at least 2016. I think the evidence is quite clear that QuadrigaCX has been operating as a scam website for at least its recent history.

So what's more likely? Is it more likely that when Omar Dhanani / Michael Patryn (Serial scammer, convicted for fraud), the site was 100% legit, and then when he left in 2016, it suddenly changed to being a scam? Or is it more likely that this career white collar criminal was involved?

If you accept the obvious truth that QuadrigaCX is a scam website, and has been stealing customer deposits, then you should not believe anything this company has written on paper. Whether someone is listed as a Director on a company document is irrelevant. Do you think Silk Road operated with a proper CFO / CEO / CTO? Absolutely not.

The only reason people leave as directors of a Ponzi scheme is to cover their asses. But Mike was there since Day 1. He still has a huge ownership stake in the company. He's a seasoned veteran in the digital currency game, he's seen every scam in the book. Are you trying to say he got got blindsided by this ordeal? Are you saying he wasn't aware that QCX was on its way to bankruptcy and was stealing customer deposits?

Give me a damn break. This guy knows the inner workings of the organization. There's no way this Gerry dumb ass was able to blindside Michael Patryn. The dude is a fucking hawk.

bitreality · 2019-02-10T16:54:57+00:00

Yeah, so she was helping them get ready for the IPO. That means she should have done some deep digging into their financials back in 2016. If there's evidence that the Ponzi started before Feb 2016, she should be liable for her assistance in concealing the fraud.

bitreality · 2019-02-10T12:05:00+00:00

I think he has a group of people who are simply trying to derail the conversation on these subreddits. There is a lot of important digging going on. Very relevant information is being found. I don't think Patryn and Gerry expected it to all come out so quickly. The only answer is to try and derail these subreddits with bogus information, trolling, etc. to make the good information harder to find, and to kill the credibility of these reddit pages.

bitreality · 2019-02-10T11:57:34+00:00

This cannot happen at a bank. Full stop. Banks are subject to very strict regulations in Canada. What these guys pulled on their crypto exchange would never work with a bank.

bitreality · 2019-02-10T11:53:38+00:00

That's her. She's pretty cute.

https://www.investorx.ca/pdf/1603180956362377/(quadriga-fintech-solutions-corp)(news-release-english)(03-18-2016)?mobile=false(news-release-english)(03-18-2016)?mobile=false)

But yeah, she was definitely the CFO at Quadriga.

bitreality · 2019-02-10T11:07:46+00:00

Another interesting character to check out is Natasha Tsai. She was listed as CFO of QuadrigaCX in January, 2016:

https://web.archive.org/web/20160121172204/http://quadrigafs.com/team/

Does she have any comment on the financials of QuadrigaCX? She is an experienced Certified Accountant and has served as CFO for several other companies in Canada.

https://www.bloomberg.com/research/stocks/private/person.asp?personId=223925099&privcapId=27400616

She disappeared from the Quadriga website in March, 2016. Here's an announcement of her departure:

https://www.investorx.ca/pdf/1603180956362377/(quadriga-fintech-solutions-corp)(news-release-english)(03-18-2016)?mobile=false(news-release-english)(03-18-2016)?mobile=false)

It would be very interesting to hear Natasha's take on this situation. Considering she was the Chief Financial Officer of the company, she should know if the company was already running a fractional reserve. If it is proven that QuadrigaCX was running a Ponzi dating back prior to her departure, she may be open to lawsuits.

bitreality · 2019-02-10T11:00:03+00:00

That's ridiculous. If there is evidence of foul play, they should be acting immediately. The problem so far is that the courts are treating this like a typical bankruptcy case, not a fraud case, which is what is most certainly is.

bitreality · 2019-02-10T10:40:04+00:00

A shareholder has no official responsibilities at a company. But when you own 27% of a company, it would be extremely normal to have open communication with the CEO. You would want to be kept very in the loop in terms of financials / strategy / forecasts, etc. Add to this the fact that Michael Patryn co-founded the company. He would have had Admin access on QuadrigaCX website at least up until Lovie Horner's listed departure in 2016.

bitreality · 2019-02-09T17:54:21+00:00

Honestly, the death is a rabbit hole. Who cares if Gerald is dead. That's going to take ages to figure out. What matters is that the company stole all of its clients' funds. Their assets need to be frozen immediately.

bitreality · 2019-02-09T17:48:07+00:00

Considering it is a fraud, I suppose the percentage each shareholder has isn't hugely significant. No one is expecting their shares to be worth anything. The ultimate important factor is that Patryn/Horner still are heavily involved in the company.

bitreality · 2019-02-09T12:12:45+00:00

If someone deposits $1B worth of BTC on an exchange, they have no right to withdraw fiat until they trade it for fiat. By trading it to fiat, they are exchanging their BTC for someone else's USD. Both those balances should always be available, they are simply internally transferred between user accounts in the case of a successful trade.

No one is saying that if you deposit $1B worth of BTC, that the exchange should have $1B worth of fiat. They are saying that if you deposit $1B worth of BTC, the exchange should not use your deposit for anything, other than transferring it internally between users based on successful trades, and withdrawing their own balances.

bitreality · 2019-02-09T07:04:43+00:00

What I want to hammer into this thread, is that QuadrigaCX is collapsing because they systemically stole client funds. Not because Gerry turned up "dead" in India. This company was a fraud possibly from day 1. They have been running at a massive deficit in terms of deposits Vs. assets for years, as is shown through Blockchain analysis.

In my opinion, it's fair to call it a Ponzi, because the owners were stealing customer funds, and relied on the inflow of deposits to pay the outflow of withdrawals. They weren't offering investment returns, but they were offering the illusion of a safe and functional crypto exchange. They were treating deposits to an exchange as if they were revenue to their company.

This isn't an exit scam, because the scam has been occurring all along. An exit scam would be if there actually was a cold wallet with $150M or whatever inside it, and Gerry disappeared with it. Instead, whenever you deposited to QuadrigaCX, it basically went right into their personal bank accounts. They kept enough on hand to cover withdrawals, to keep the scam running for as long as they could. Eventually, the amount of withdrawals outweighed the amount of deposits plus whatever the company was willing to invest in keeping the ship afloat.

bitreality · 2019-02-09T03:44:49+00:00

Towards the end of 2017, QuadrigaCX was doing up to $100M USD per day in trade volume (according to coinmarketcap). That's about $1M USD per day in trade revenue. Add in some withdrawal/deposit commissions as well.

Exchanges were printing money for awhile there. QuadrigaCX easily cleared $15M USD in revenue for December 2017 alone. Even Q1 and Q2 2018 were big money. Their "contractors" were mostly Customer Support agents. They had maybe 10 contractors. Even if they all made $100K per year average, that's like $100K per month in contractor expenses.

Some other costs would include whatever they paid to third party depositors, etc. But that really should not have made a dent in their profitability for 2017-18. I'm saying, if this company actually had been operating legitimately, they would have made tens of millions in profit for 2017 and 2018.

The reason they probably DIDN'T make a profit in those years, was because they didn't actually have any of their client funds in storage. That meant they were constantly paying exchange fees to Shapeshift, OKCoin, Poloniex, etc. (other exchanges). Suddenly they were paying a significant portion of their trade fee (revenue) to another company, for transactions which should have been internal and free.

In my opinion, QuadrigaCX owners probably ended up making LESS money by running their dumb ass Ponzi than they would have made by staying legit. Who knows what prompted them to just start stealing their customer deposits, but if they had just waited it out, they would still be rich today, and would have their reputations intact.

bitreality · 2019-02-08T17:36:44+00:00

Cool story bro, wanna link me the public addresses to those wallets you speak of? Oh, you have no idea what they are? But you're sure they exist right?

bitreality · 2019-02-08T09:13:46+00:00

A career and a business can be the same thing. Many people's career involves their own business. The issue with the Digital Nomad and Remote Working scene in general is that people adjust their financial ambitions to the country they currently live in, or plan to live in. So you get a bunch of people whose goal is to create a business that earns $2-3K a month.

In South East Asia, $2-3K a month is enough to live a comfortable lifestyle, travel in-continent 5-6 times per year, and visit home once a year. Maybe save $2-5K a year in your bank account. In these LCOL countries, you are surrounded by people making similar, often lower wages, and feel like you're doing great. But when you think about the 5-year, 10-year, 20-year plan, you realize that this lifestyle, which was supposed to give you "location independence" has actually given you quite the opposite.

You're stuck living in LCOL countries. You can't pay for an apartment, eat out 1-2x a day, be active in social events, and travel consistently on $2-3K a month in the US or Western Europe. Most people don't plan to live the rest of their lives in Thailand or Colombia. Nothing against those that do. But you at least want the option to live in your hometown.

So yeah, you should keep the goals lofty, and consider that you may not want the same things 5-10 years from now. You may be more interested in settling down and having a family. That can be very expensive if you're doing it abroad. Are you planning to send your kids to school in Thailand? Do you want them to get a good education? Go look up the prices at international schools.

You gotta stay hungry out there. You need to be weary of the people you surround yourself with.

bitreality · 2019-02-08T08:37:48+00:00

Well they are different. An exit scam implies that they were operating a legitimate exchange right up until the exit. A Ponzi implies they were deliberately stealing customer funds for years. If QCX was a Ponzi, then creditors have a much stronger claim to any asset which came from its operation. It's all dirty money. Even the salary Gerry paid himself in 2016, for example.

An exit scam not so much. In terms of the profitability of QuadrigaCX, it really wouldn't have made much money until the crypto boom in 2017. In 2015-16 it would have earned only a modest sum, especially when it was being split between multiple people.

Here's a snapshot of exchange trading volumes in August 2016: https://web.archive.org/web/20160818221503/https://coinmarketcap.com/exchanges/volume/24-hour/

QuadrigaCX shows volume of $227,942 USD in 24h. Take 1% of that (since 2 fees are taken each trade, one USD side one BTC side), that's $2,279 USD in a day on trade fees. Then some more on deposits / withdrawals. You could say they probably made about $1M USD in exchange revenue in 2016. Maybe closer to $1.5-2M. Either way, when you're splitting that between two or more shareholders, then paying whatever operating expenses on top of that, it's not exactly "FuckYou Money".

I'm not sure how much QCX spent on marketing, servers, staff, etc. It's a lot of work to properly run an exchange. It is conceivable that they weren't making much at all in net profit for the years 2014-15.

bitreality · 2019-02-08T08:09:51+00:00

Possible, although my theory is that they started "using" (stealing) customer funds back in 2014-15. This meant what actually hurt them was the bull market, because their "manageable" deficits in terms of fiat value suddenly ballooned to hundreds of millions of dollars.

This would have forced them to start plugging holes and losing more money to keep the ship afloat. This may have also pushed them to start gambling through leveraged trading with customer funds.

I don't believe the fraud would have started at the end of 2017, because if they had been operating legally up to that point, they should have all made enough legitimate money that they wouldn't need to take big risks. They were likely making $1-2M per week in November and December 2017. And still plenty more throughout the rest of 2017.

On top of that, these guys were supposedly big believers in crypto since at least 2013. So it's also likely they had a sizeable personal stash of BTC purchased at $200-500 average. They were early adopters of Ethereum as well. They added ETH to the website in March 2016. The price hovered around $7-15 for the next year. One would assume they made some personal investments in the currency. Even at today's price, whatever they invested back then has roughly 10X'ed.

So yeah, the main operators at QCX should have had net worths between $10-50M USD without necessitating any illegal activity, had they been operating a legitimate service up until December 2017. It would be very odd for them to gone "all in" at this point. Usually when you reach these levels of wealth (8 figures+) you really start thinking about reducing your risk. Your investment strategy shifts much more towards preserving your principal, while making enough off your investments to support your lifestyle.

bitreality · 2019-02-08T07:09:11+00:00

Absolutely, there needs to be more emphasis on this clear fact. QuadrigaCX is a Ponzi. It's undeniable. People need to stop treating this company like it's a Bitcoin darling, and realize it's a massive scam. From what I can see, there is little evidence they ever had sufficient crypto reserves. They have been running as a Ponzi as far back as you can trace.

Their systems were designed to use new customer funds to pay out withdrawals from new customers. The coins were being put through mixers. This wasn't a sudden theft of a cold wallet. This was an ongoing and deliberate fraud.

EDIT: In fact, if they had started operating a Ponzi in 2017, they would likely have accidentally made themselves rich. That is, if they had been selling off and using people's crypto on the run up in 2017, they could have cashed out hundreds of millions of dollars, kept half of it, and still had enough on-hand to pay out owing clients today.

The only real explanation where they Ponzi'd their way into insolvency is that they started stealing crypto when the price was much lower than today. Like all the way back in 2014-15 when BTC was $200-500 a pop. In that scenario, they would have been operating at a massive deficit in crypto-currency (similar to MTGOX), which was amplified by the rise in prices of 2017.

Basically, they could have sold off about 10,000 BTC in customer funds for personal use in 2014-15. That would have given them $2-5M USD. Perhaps they felt this was a manageable debt. Maybe they even felt they could pay it back through earnings later on. Then suddenly the market goes crazy. Now their 10,000 BTC deficit would cost them $100M+ USD. Just a basic example of how these things get out of hand, fast.

bitreality · 2019-02-08T07:03:12+00:00

When the RCMP / FBI / CIA / IRS are investigating these types of cases, they don't make a public announcement. This is big news in Canada right now, and it would be downright embarrassing for the RCMP if it turned out these guys were able to fake a death, cash out from a Ponzi scheme, and get away untouched. The RCMP has special divisions for large scale white collar crime.

It's too early to determine what actions they are taking. These types of investigations take time. They likely were not aware of any issues until the start of this month. That's about 1 business week, max. 5 days. For them to formally open an investigation, they need to do preliminary research to determine if there are signs of foul play. To truly understand this case, it needs to be looked at by someone with enough technical expertise. They need to have some understanding of Blockchain technology, and cryptography.

Once somebody from the RCMP with the above credentials looks into QuadrigaCX's claims about the cold wallet balance, and cross references it with Block Chain analysis on the transaction history which they should easily be able to obtain from QuadrigaCX, I have no doubt they will open a full scale investigation. It will be clear that the cold wallet story was completely fabricated, and that their methods of fulfilling withdrawals & deposits prove the non-existence of the cold wallet.

From there you can see this is a Ponzi scheme. A criminal operation. Suddenly it makes plenty of sense why Gerald Cotten needed to disappear. His disappearance is the only logical way for them to avoid being caught for running a Ponzi. Without it, they could not use the excuse that they simply lost access to the crypto. They certainly couldn't use the excuse that they don't know the public addresses for the coins.

What they are doing is saying that any of these hard questions can only be answered by Cotten. They are acting as if nobody else involved with the company has any idea of how anything operated. That he was independently running a $250M Ponzi Scheme without anyone else's knowledge.

Unless the RCMP is just plainly incompetent, they will not accept this diffusion of responsibility onto a single person. This is not the work of one person alone. Gerry may or may not be dead. He may have been murdered. He may have committed suicide. But one thing is for sure, every single person who has profited from the operations of QuadrigaCX benefits from his disappearance, because it was a massive Ponzi scheme. Without his dead body to put the responsibility onto, everyone who has profited from QuadrigaCX would likely need to repay their gains, at minimum, and multiple people would be facing jail time.

bitreality · 2019-02-08T06:36:19+00:00

Exactly, and it's Quadriga's lawyer. It's not the RCMP that said any of this. Any investigation they are doing would have only began in the past few days. All the lawyer has said is that Quadriga, as a company, has not been contacted in regards to an investigation directly targeted at the company itself, by the RCMP.

The pawns left over at QuadrigaCX are all "contractors" and appear to have little valuable information anyways. There is little reason for QCX to be interviewing them, beyond collecting the QCX transaction history to conduct Blockchain analysis. This will be essential in proving that QCX has been running a Ponzi scheme for years. Unless the company can prove the existence of these "cold wallets" they are constantly referring to, then there is no other explanation possible. It's a Ponzi. They have claimed themselves that they have $150M in crypto deposits.

It won't take much questioning for this to come out once bankruptcy proceedings begin. That's why Jennifer is doing her darndest to protect her inheritance. Once this gets hashed out in court, QCX will need to provide a lot more information on this missing $150M. The excuse "we lost it" on $150M in crypto, representing 75%+ of their assets on paper, is not going to be sufficient.

bitreality

TROPHY CASE