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When Gerald Cotten died suddenly in December, he may have taken $180-million in cryptocurrency with him. Nobody – not even his widow – knows where the money is.

Mr. Cotten founded a cryptocurrency exchange platform known as QuadrigaCX in 2013 that handled millions of dollars in transactions on behalf of more than 100,000 users. He ran the company mostly from his laptop, usually from his home in Nova Scotia. Quadriga had no office, no corporate bank accounts and no accounting department to speak of. It had few employees, aside from Mr. Cotten.

The laptop, along with a memory stick, could hold valuable clues to the location of money belonging to Quadriga users – if only someone could access it. Mr. Cotten, who was 30 when he died, was conscious of security, and his laptop is encrypted. One tech expert has already tried and failed to hack into it.

These details were laid out on Tuesday in the Supreme Court of Nova Scotia after Quadriga filed for relief under the Companies' Creditors Arrangement Act. Justice Michael Wood issued a 30-day stay of proceedings against Quadriga, shielding the floundering company from legal action launched by panicked customers collectively owed $250-million. The court also appointed Ernst & Young as a monitor. As part of its duty to oversee the search and recovery of Quadriga’s assets, Ernst & Young will take possession of Mr. Cotten’s laptop and memory key.

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Users of Quadriga, which allows customers to buy and sell digital currencies such as bitcoin, have been unable to make withdrawals since the company reported the death of Mr. Cotten, who was also its sole board member and keeper of its most important passwords. A statement on Quadriga’s website said he died of complications from Crohn’s disease while travelling in India. He was in the country to open an orphanage, the company said.

The executor of Mr. Cotten’s estate, his widow, Jennifer Robertson, called a meeting of shareholders after his death to appoint new board directors, who later closed the trading platform.

“After his death, it has been difficult to establish where the assets are and how the cash moves,” Maurice Chiasson, a lawyer representing Quadriga, told the Halifax court. “It’s important for the user community that they have some confidence that everything is being done. ... The company just hasn’t been shut down and its owners walked away.”

While it is common for cryptocurrency exchanges to hold assets in “cold wallets” – offline storage locations to protect them from hackers – it is not clear where Mr. Cotten stored as much as $180-million in digital currency owed to Quadriga users. Ms. Robertson said in an affidavit she hired a retired RCMP expert to hack into the encrypted computer, but the efforts have been unsuccessful.

Another portion of Quadriga’s funds is tied up with third-party payment processors. Quadriga could not obtain corporate bank accounts, and used payment processors to transfer funds. Mr. Chiasson said the company has been unable to cash about $30-million in bank drafts. Court documents say an “organization” identified as WB21 is holding millions of dollars belonging to Quadriga and refusing to release it or respond to communications from the company.

On Nov. 27, less than two weeks before his death, Mr. Cotten signed a will, appointing Ms. Robertson as his executor and outlining the distribution of his assets should she not survive him. Those assets include an airplane, properties in Nova Scotia and British Columbia as well as two pet Chihuahuas named Nitro and Gully, along with $100,000 for their care.

The bizarre case lays bare the lack of regulation in an opaque industry that is struggling for legitimacy. While countries such as Japan and Australia have established regulatory oversight for the sector, Canada has yet to implement a system for virtual-currency exchanges.

It’s “highly unusual” for one person to have sole possession of the keys to cold wallets, said Nick Chong, head of North America for Quoine, a Japanese company that operates an exchange called Liquid. In some companies, several individuals hold keys, and a quorum is required to facilitate transactions. “One single person who has bad intentions cannot steal the funds,” he said, “but if one person is unable to access the funds, the others can do it.” Regulations in Japan require exchanges to be audited quarterly, ensuring they have enough funds to satisfy customer withdrawals.

Vancouver resident Michael Tinant, who had $17,000 with Quadriga, says the appointment of the monitor gives him some confidence the missing cryptocurrency might be found. “There could potentially be quite a bit of money there,” said Mr. Tinant, who asked to withdraw his funds three months ago but never received them.

Quadriga’s decision to shutter the platform in January set off uncertainty among users, which Mr. Chiasson acknowledged in court.

“When that step happens, it creates panic,” he said, adding that the action was taken because Quadriga “had no secure way of stopping the flow” of deposits. “You’ve got a company that operates on some guys’ computer. There’s no office, no physical presence,” he said.

Since the platform was paused, online message boards have been filled with what Mr. Chiasson called “fact and fiction,” including questions about whether Mr. Cotten actually died. He said Ms. Robertson did not appear in court for “security” reasons and that she has been the subject of personal attacks online. Funding the court process out of pocket, Ms. Robertson “wants answers,” Mr. Chiasson said. “As does everybody else.”

Industry insiders say the loss of the funds points to a need for regulatory oversight of virtual-currency exchanges, which operate largely outside the purview of regulators.

“The fact that something like this was able to happen, with a sole individual allegedly having control over hundreds of millions of customer funds, speaks to how little action the government has taken in this industry," said Dean Skurka, vice-president of finance and compliance at Canadian cryptocurrency trading platform Bitbuy.

The Department of Finance did not immediately respond to a request for comment.

The Canadian Securities Administrators, an umbrella organization of provincial securities regulators, said it is working with the Investment Industry Regulatory Organization of Canada (IIROC) to develop rules for platforms trading crypto-assets.

Daniel Fuke, a lawyer at Fasken Martineau DuMoulin LLP who advises cryptocurrency companies, said regulators should require exchanges to have audited disaster-recovery plans.

“Most industry participants would welcome that, since this type of situation gives weight to the skeptics and critics who try to characterize the crypto industry as being comprised only of hackers and Silk Road drug dealers,” Mr. Fuke said.

Quadriga users are concerned about Mr. Cotten’s computer, said Raj Sahni, a lawyer who said he represents 78 creditors who have more than $11-million with Quadriga.

“The clients are very worried that this laptop, which apparently has all of the data relevant to the business, not end up disappearing or missing,” Mr. Sahni said. “The question our clients have is, ‘Where is the money?’ ”

The laptop is currently in Toronto at the law firm Waddell Phillips.

While Quadriga’s lawyers were pleased with the motion, which Mr. Chiasson said brought “a controlled process” to “chaos,” counsel for the platform’s users were less pleased. At least five lawyers, including Mr. Sahni, have expressed interest in representing at least a portion of the Quadriga users. Justice Wood said he would not hear a motion to officially appoint legal counsel for those users until next week.

Mr. Sahni said waiting to appoint a go-to lawyer could draw out the chaos.

“This is a case about people in chat rooms spreading misinformation, spreading false allegations,” he said. “We really need to get that in check.”

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