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Canadian cryptocurrency exchange Quadriga CX is missing approximately $190-million in funds after the company reported the sudden death of its young founder in December, according to an application for creditor protection filed Thursday.

Quadriga Fintech Solutions Corp., which owns and operates the exchange, is facing a “liquidity crisis” and has only $375,000 in cash while owing the equivalent of more than $260-million to approximately 92,000 users, according to an application for relief under the Companies’ Creditors Arrangement Act (CCAA) filed in the Nova Scotia Supreme Court. Quadriga is seeking to appoint Ernst & Young Inc. as a monitor.

The company has been unable to locate and access about $190-million worth of cryptocurrency, which includes bitcoin and Ethereum, since co-founder and sole director Gerald Cotten, 30, died on Dec. 9. Mr. Cotten was diagnosed with Crohn’s disease at age 24 and passed away due to complications from the condition while travelling in India, according to court documents. According to a statement on Quadriga’s website posted more than a month after his death, Mr. Cotten was in the country to open an orphanage.

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Quadriga, which launched in 2013, kept the majority of its cryptocurrency in what’s known as “cold wallets,” essentially an offline storage system that protects the funds from hacking and theft. Mr. Cotten had sole responsibility for handling the funds and held the digital security keys to access the wallets, which the company attempted to find after his death. “Quadriga was unable to access the cold wallets and/or discovered that the cold wallets contained minimal cryptocurrency units,” according to a report filed with the court by Ernst & Young.

Mr. Cotten mostly ran the business on his own from his laptop wherever he happened to be, which was typically in a house he shared with his wife in Nova Scotia. Mr. Cotten’s primary laptop is encrypted, according to an affidavit filed by his widow, Jennifer Robertson. “I do not know the password or recovery key,” she said in the affidavit. “Despite repeated and diligent searches, I have not been able to find them written down anywhere.”

She also searched their home and other properties for any company documents, but came up empty. Ms. Robertson hired an outside tech expert to attempt to “hack into Gerry’s computers” in addition to an encrypted USB key. The expert had some luck retrieving a few digital coins and some information from Mr. Cotten’s cellphones and another computer, but the effort has mostly been unsuccessful, the affidavit says.

Ernst & Young argued in its report that creditor protection is necessary to permit an investigation into the missing coins and determine the amounts owing to users, noting that Quadriga’s “accounting systems either do not exist or are not capable of recording and producing even the most basic of accounting summaries.” If approved as a monitor, the company will also determine if a sale of Quadriga is possible.

Operators of other Canadian cryptocurrency exchanges called it highly unusual for a single executive to be the only one with access to the company’s funds. That would have made Mr. Cotten - who was well known in the cryptocurrency community and an avid traveller - vulnerable to being kidnapped or extorted, said Michael Gokturk, CEO of Vancouver-based Einstein Exchange.

“It’s the equivalent of walking around with millions of dollars in cash on you at all times,” Mr. Gokturk said.

Mr. Cotten was diligent in other areas of his life. He signed a will on Nov. 27, less than two weeks before he died. He appointed Ms. Robertson as the executor of his estate, and also outlined distribution of his assets should she not survive him. Those assets included an airplane, property in British Columbia and Nova Scotia, and two pet chihuahuas named Nitro and Gully, along with $100,000 for their care.

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Another portion of Quadriga’s funds is tied up with third-party payment processors. The company had difficulty obtaining accounts with Canadian banks, and last year the Canadian Imperial Bank of Commerce froze approximately $25.7-million held in an account belonging to one of Quadriga’s payment processors. The funds were eventually paid by CIBC to the Ontario Superior Court of Justice, which transferred the money to the payment processor, Costodian Inc., in the form of bank drafts. Neither Costodian nor Quadriga has been able to find a bank to accept the drafts, however.

Users have been complaining over the course of the past year about difficulties withdrawing money from the exchange. The Globe has spoken to several of these clients, some of whom experienced months of delays trying to withdraw tens of thousands of dollars. None of them wished to be identified due to privacy concerns. The largest individual user account balance is valued at $70-million.

Quadriga continued accepting deposits for weeks after Mr. Cotten’s death. Ms. Robertson, as executor of his estate, filed for an application in B.C. to hold an emergency meeting on Jan. 25 to appoint board directors. Following the meeting, the board decided to take down Quadriga’s trading platform on Jan. 28.

Ms. Robertson’s affidavit notes there has been a significant amount of comment on Reddit and other forums about Quadriga, including speculation about whether Mr. Cotten is actually dead. (The CCAA filings contain a statement of death issued by J.A. Snow Funeral Home in Halifax.) “There have also been threats made against me,” she said. “Slanderous comments have been made against me and sent through Facebook messenger to my entire contact list.” Ms. Robertson is personally funding the costs of the CCAA proceedings, according to her affidavit.

A preliminary hearing is scheduled for Feb. 5.

Exchange operators say Quadriga’s inability to retrieve the funds points to a need for greater regulatory oversight of their industry. Although most exchanges claim to have security protocols in place to protect client funds, such measures are not mandated by any Canadian regulator.

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“Exchanges have not really had to report to any regulator on the way in which they run their business,” said Cole Diamond, chief executive of Canadian cryptocurrency company Coinsquare. “That’s why you’re seeing the problem that we’re seeing here today with Quadriga.”

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