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The court-appointed monitor overseeing the search for millions of dollars lost by a Canadian cryptocurrency exchange says an additional $500,000 worth of bitcoin was transferred earlier this month as a result of a company “error.”

On Feb. 6, the day after the Nova Scotia Supreme Court granted QuadrigaCX creditor protection and appointed Ernst & Young as monitor, the beleaguered cryptocurrency trading platform inadvertently transferred roughly 104 bitcoins to cold storage wallets it cannot access, according to a report filed with the court. Cold wallets are offline storage facilities where cryptocurrency is typically held to protect it from hackers.

Now, in a report released on Thursday, Ernst & Young says it was told by Quadriga’s management that the company mistakenly changed a setting on the platform that triggered an automatic transfer of bitcoin from the company’s “hot” wallets – those accessible online – to its cold wallets.

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“The Monitor understands from Management that the inadvertent transfer occurred due to a platform setting error by [Quadriga] …” the report reads. “The Monitor has viewed the wallet addresses that received the cryptocurrency as a result of the setting change and has confirmed that the transfers occurred at the time noted by Management and that the Quadriga cold wallets continue to hold approximately 104 bitcoins."

Read more

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How did Gerald Cotten die? A Quadriga mystery, from India to Canada and back

Crypto chaos: From Vancouver to Halifax, tracing the mystery of Quadriga’s missing millions

The company has said it has been unable to access its cold wallet storage since the death of chief executive Gerald Cotten, who, according to his widow, Jennifer Robertson, was the only one able to do so. The wallets could hold as much as $180-million worth of missing cryptocurrency, the company has said.

Mr. Cotten died in December from complications related to Crohn’s disease while he and Ms. Robertson were on their honeymoon.

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In total, 115,000 users of QuadrigaCX, the trading platform owned and operated by Quadriga Fintech Solutions Corp., are owed approximately $250-million.

Ernst & Young says that on Feb. 14, it successfully transferred Quadriga’s remaining cryptocurrency holdings to the monitor’s own cold storage wallets. Those holdings include approximately 51 bitcoins, 33 bitcoin cash, 2,032 bitcoin gold, 822 litecoins and 951 ether. The monitor will hold onto these funds until the court decides otherwise.

Meanwhile, Jack Martel has resigned from the company’s board, leaving only Ms. Robertson and her stepfather, Thomas Beazley, as the remaining directors. Both were appointed by Ms. Robertson after her husband’s death.

Ernst & Young also said it is working with Royal Bank of Canada to get four bank drafts totalling more than $20-million deposited into an account.

The funds were previously part of a pool of money that had been held in Canadian Imperial Bank of Commerce accounts owned by Costodian Inc., one of Quadriga’s payment processors. CIBC had frozen the money and handed it over to the court, which ultimately released it back to Quadriga and its payment processor in the form of bank drafts.

Ernst & Young said RBC has agreed to deposit the drafts, pending a court order. It is important for those drafts to be deposited in a “timely manner” because there is currently no money – besides some interim financing provided by Ms. Robertson that will run out soon – to fund the search for the missing cryptocurrency and return it to customers.

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The complicated trades of QuadrigaCX

This is an example of how some users funded their accounts and traded on QuadrigaCX, as outlined by Canadian Imperial Bank of Commerce in a court filing. Quadriga has been granted creditor protection, and its users are collectively owed about $250-million.

STEP 1

After setting up an account, a user would send a wire transfer to a Costodian account at CIBC. Costodian is a company whose "sole purpose," according to CIBC, was to hold funds deposited by investors.

Investor

Costodian

STEP 2

Billerfy, a payments processor, provided Quadriga with the investor's ID and deposit amount. (Billerfy and Costodian share an owner.)

Billerfy

Quadriga

STEP 3

Quadriga credited an investor's online wallet with "QuadrigaCX Bucks," which could be used to buy and sell cryptocurrencies, such as bitcoin, on the Quadriga exchange.

QuadrigaCX Bucks

Investor

Online wallet

Quadriga

STEP 4

To cash out, an investor would submit a withdrawal request to Quadriga, which forwarded the request to Billerfy.

Quadriga

Investor

Billerfy

STEP 5

Billerfy aggregated the requests and withdrew from Costodian accounts at CIBC to an account held by Billerfy at another financial institution.

STEP 6

Billerfy then transferred funds to the investor.

Investor

FINAL WORD

CIBC froze Costodian accounts holding more than $20-million in January, 2018. The funds were eventually released to Quadriga and its payment processors by court order, though they've struggled to deposit the funds. Ernst & Young is working with Royal Bank of Canada to get four bank drafts deposited.

MURAT YUKSELIR AND MATT LUNDY /

THE GLOBE AND MAIL

The complicated trades of QuadrigaCX

This is an example of how some users funded their accounts and traded on QuadrigaCX, as outlined by Canadian Imperial Bank of Commerce in a court filing. Quadriga has been granted creditor protection, and its users are collectively owed about $250-million.

STEP 1

After setting up an account, a user would send a wire transfer to a Costodian account at CIBC. Costodian is a company whose "sole purpose," according to CIBC, was to hold funds deposited by investors.

Investor

Costodian

STEP 2

Billerfy, a payments processor, provided Quadriga with the investor's ID and deposit amount. (Billerfy and Costodian share an owner.)

Billerfy

Quadriga

STEP 3

Quadriga credited an investor's online wallet with "QuadrigaCX Bucks," which could be used to buy and sell cryptocurrencies, such as bitcoin, on the Quadriga exchange.

QuadrigaCX Bucks

Investor

Online wallet

Quadriga

STEP 4

To cash out, an investor would submit a withdrawal request to Quadriga, which forwarded the request to Billerfy.

Quadriga

Investor

Billerfy

STEP 5

Billerfy aggregated the requests and withdrew from Costodian accounts at CIBC to an account held by Billerfy at another financial institution.

STEP 6

Billerfy then transferred funds to the investor.

Investor

FINAL WORD

CIBC froze Costodian accounts holding more than $20-million in January, 2018. The funds were eventually released to Quadriga and its payment processors by court order, though they've struggled to deposit the funds. Ernst & Young is working with Royal Bank of Canada to get four bank drafts deposited.

MURAT YUKSELIR AND MATT LUNDY / THE GLOBE AND MAIL

The complicated trades of QuadrigaCX

This is an example of how some users funded their accounts and traded on QuadrigaCX, as outlined by Canadian Imperial Bank of Commerce in a court filing. Quadriga has been granted creditor protection, and its users are collectively owed about $250-million.

STEP 1

After setting up an account, a user would send a wire transfer to a Costodian account at CIBC. Costodian is a company whose "sole purpose," according to CIBC, was to hold funds deposited by investors.

STEP 2

Billerfy, a payments processor, provided Quadriga with the investor's ID and deposit amount. (Billerfy and Costodian share an owner.)

Investor

Costodian

Billerfy

Quadriga

Online wallet

QuadrigaCX Bucks

STEP 3

Quadriga credited an investor's online wallet with "QuadrigaCX Bucks," which could be used to buy and sell cryptocurrencies, such as bitcoin, on the Quadriga exchange.

STEP 4

To cash out, an investor would submit a withdrawal request to Quadriga, which forwarded the request to Billerfy.

STEP 5

Billerfy aggregated the requests and withdrew from Costodian accounts at CIBC to an account held by Billerfy at another financial institution.

Quadriga

Investor

Billerfy

STEP 6

Billerfy then transferred funds to the investor.

FINAL WORD

CIBC froze Costodian accounts holding more than $20-million in January, 2018. The funds were eventually released to Quadriga and its payment processors by court order, though they've struggled to deposit the funds. Ernst & Young is working with Royal Bank of Canada to get four bank drafts deposited.

MURAT YUKSELIR AND MATT LUNDY / THE GLOBE AND MAIL

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