Cryptocurrency Exchange Loses Password, Access to $190 MillionCryptocurrency Exchange Loses Password, Access to $190 Million
After the founder and CEO's unexpected death, nobody else has the keys to the vault.
We recently ran a piece about estate planning for your own cryptocurrency, but what do you do if the founder of the exchange you use doesn’t follow the same advice? Watch $190 million vanish into thin air apparently.
Over the weekend, the QuadrigaCX cryptocurrency exchange announced that it can't access some $190 million in bitcoin and other funds because its founder and CEO, Gerald Cotten, died on a trip to India in December without sharing the password for his encrypted laptop with anyone. The company, which is, unsurprisingly, facing dire financial straits, claims it has "very significant cryptocurrency reserves," but that it can't locate or secure them.
This difficulty stems largely from how Quadriga stored customer assets. A certain amount is kept in online “hot wallets,” which, similar to a checking account, allow for easy access and quick transactions. However, the vast majority of currency in the exchange is kept in “cold storage,” sort of the crypto equivalent of a savings account, and stored offline (in this case in Cotten’s laptop) for security reasons. Apparently, Cotten was the only one who held the keys to the cold storage vault and would transfer the assets from cold to hot manually.
Quadriga has hired a security expert to attempt to breach the encryption, but until (if?) that effort bears fruit, its customers’ funds are stuck in crypto purgatory.
