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Canada Evening Update: The mystery of QuadrigaCX’s missing millions

Good evening,

WHAT YOU NEED TO KNOW

A laptop, a sudden death and $180-million gone missing: Quadriga investors search for their cryptocurrency

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The curious case of Quadriga has gripped the business community. QuadrigaCX is a cryptocurrency exchange platform founded in 2013 by Gerald Cotten and it handled millions of dollars in transactions on behalf of more than 100,000 users. But in December, Mr. Cotton died at the age of 30 while travelling in India and it’s believed he was the only one who knew how to access as much as $180-million of his client’s cryptocurrency.

The Globe’s Atlantic bureau chief Jessica Leeder, Report on Business reporter Joe Castaldo and capital markets reporter Alexandra Posadzki wrote about it in today’s paper. They report:

  • Mr. Cotten ran the company mostly from his laptop, which was encrypted.
  • The company had no office, no corporate bank accounts and no accounting department. 
  • Mr. Cotton was the company's sole board member and keeper of its most important passwords.
  • The laptop, and a memory stick, could hold valuable clues to the location of money belonging to Quadriga users.
  • Users have been unable to make withdrawals since the company reported the death of Mr. Cotten.

All of these details were laid out yesterday in the Supreme Court of Nova Scotia after the company filed for relief under the Companies' Creditors Arrangement Act. The court appointed Ernst & Young as a monitor, which will take possession of the laptop and memory key.

To make matters even odder, Mr. Cotten signed a will less than two weeks before his death and appointed his wife, Jennifer Robertson as his executor and outlined 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.

Meanwhile, Report on Business columnist Barrie McKenna has a column on the subject: The crypto world is a dangerous place for ordinary investors, and regulators.

We’ll have lots more on Quadriga and the cryptocurrency industry later tonight online and in tomorrow’s paper.

This is the daily Evening Update newsletter. If you’re reading this on the web, or it was forwarded to you from someone else, you can sign up for Evening Update and more than 20 more Globe newsletters on our newsletter signup page.

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Left to right is engineer Andrew Dockrell, conductor Dylan Paradis and Trainee Daniel Waldenberger-Bulmer killed in the Canadian Pacific freight train derailment near Field, B.C.

Derailed Canadian Pacific freight train began moving on its own after emergency stop

The freight train that derailed and killed all three crew members in British Columbia on Monday began rolling on its own after crew made an emergency stop to adjust its brakes at the top of a steep grade. The train derailed near Field, B.C., careening off a bridge into the Kicking Horse River. Before the accident, report transportation reporter Eric Atkins and Calgary-based reporter Justin Giovannetti, the Canadian Pacific Railway Ltd. train underwent adjustments to the air brakes on several of its grain cars, which occurred during an unscheduled two-hour halt, said David Fulton, a general chairman of Teamsters Canada Rail Conference, the union representing CP train crews.

It is not clear why the train made an emergency stop, nor why it rolled away out of control and crashed, killing conductor Dylan Paradis, engineer Andrew Dockrell and trainee Daniel Waldenberger-Bulmer. The three crew members had arrived earlier to relieve the original crew, which is believed to have worked its maximum shift. James Carmichael, a Transportation Safety Board (TSB) investigator, told reporters yesterday that the new crew had not been given permission by controllers to keep going toward Field, B.C., when the three locomotives and 112 cars filled with grain began moving downhill, during a news conference in Calgary.

President Donald Trump delivers the State of the Union address, alongside Vice President Mike Pence and Speaker of the House Nancy Pelosi, at the US Capitol in Washington, DC.

DOUG MILLS/AFP/Getty Images

Trump’s State of the Union speech: What he did (and did not) say

In a State of the Union address to both houses of Congress yesterday, U.S. President Donald Trump warned that investigations into his presidency are hurting the American economy. He also renewed his demand for a wall on the country’s southern border, warning again that hordes of criminals are pouring into the country and graphically took aim at people who support a woman’s right to abortion.

We have three articles up today that’ll provide all of the insight and explanation you need. First, Washington-based correspondent Adrian Morrow gives a sweeping account of Mr. Trump’s speech fresh off a historic government shutdown and in front of a Congress that is increasingly outside his control.

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The Globe’s west coast U.S. correspondent Tamsin McMahon has a more tightly focused piece that looks at the highlights of the speech, breaking it down into what was expected, what was unexpected, the aftermath and the rebuttal by Stacey Abrams.

And Jared Yates Sexton, an associate professor at Georgia Southern University, writes in a column that argues the State of the Union speech was as wildly unstable as the man who gave it. “This was a speech that existed in a place that has no relationship with the facts of the moment or the lives and affairs of the people of the United States of America,” he writes.

Toronto home sales expected to rebound, but mortgage rules need review: TREB

Good news for Toronto home owners: The Toronto Real Estate Board issued its annual sales forecast early this morning, and as real estate reporter Janet McFarland reports, they predict a 7.3-per-cent increase in sales this year from last year. This after two years of declining sales – in 2018 sales fell 16 per cent and in 2017 they fell 18 per cent. As well, TREB predicts the average selling price for a home in the GTA will climb to $820,000 this year, up 4.2 per cent from $787,195 last year. The average is for all home types, including condominiums and detached houses. However, the association that represents Toronto’s real estate agents says the federal government needs to rethink its tough mortgage qualification rules, which requires buyers to prove they could still afford their mortgages even if interest rates were two percentage points higher than the rate they negotiated with their bank.

MARKET WATCH

Canada’s main stock index finished slightly up on Wednesday, as marijuana stocks dragged the health care sector lower and Bank of Canada’s comment that U.S. trade policies were holding back Canadian investments weighed on the market sentiment. The Toronto Stock Exchange’s S&P/TSX Composite Index rose 9.62 points, or 0.06 per cent, to 15,712.31. U.S. stocks edged lower on Wednesday as videogame makers gave disappointing revenue forecasts and investors awaited developments on U.S.-China trade relations. The Dow Jones Industrial Average fell 19.86 points, or 0.08 per cent, to 25,391.66, the S&P 500 lost 5.97 points, or 0.22 per cent, to 2,731.73 and the Nasdaq Composite dropped 26.80 points, or 0.36 per cent, to 7,375.28.

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Got a news tip that you’d like us to look into? E-mail us at tips@globeandmail.com. Need to share documents securely? Reach out via SecureDrop.

WHAT’S ALSO ON OUR RADAR

  • Tesla Inc. said on Wednesday it was lowering the price of its Model 3 sedan for the second time this year, moves that come in the wake of Tesla losing a tax credit that made its cars more affordable for U.S. buyers. (Reuters)
  • Virginia’s attorney general, Mark Herring, admitted to having worn blackface at a college party in 1980 to impersonate a rapper, becoming the state’s third high-ranking Democrat caught up in scandal since the release Friday of a racist photo from Governor Ralph Northam’s medical school yearbook. (Reuters)
  • Canada has resettled more than 150 people rescued from slavery in Libya and another 600 more are expected over the next two years through the regular refugee settlement program, Immigration Minister Ahmed Hussen says. (The Canadian Press)
  • A number of curlers at the recent Ontario curling championship, long upset that Rachel Homan’s team was eligible despite two players primarily living out of province, voted for her to win the competition’s sportsmanship award in an apparent mock gesture, prompting the skip to demand an apology and the provincial association to launch a review into a harassment complaint. (The Canadian Press)
  • The European Union will make no new offer on Brexit and those who promoted Britain’s exit without any understanding of how to deliver it deserve a “special place in hell,” EU Council President Donald Tusk said on Wednesday. (Reuters)

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What makes a severance package fair?

There are two workplace law questions employment lawyer Daniel Lublin gets asked all of the time. The first is, “how much severance should I receive?" and the second is, “Why should my severance pay be cut off when I find another job?” His answers often rely on the particulars of a case, for example, is there a contract that lays out severance details. If there isn’t, he explains an employee is entitled to a fair and reasonable severance package and goes on to list five main factors to consider when trying to determine what makes a severance package fair: age, tenure, position, availability of comparable employment and precedent.

TALKING POINTS

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America’s rich are facing a reckoning. It’s about time

For too long, the state has been going super soft on the super rich. So says the Democratic Party, which is vowing to bring an end to that era. To that end, it’s rolling out several different tax schemes targeting billionaires and near-billionaires. The rich guys, of course, are irked and indignant. They contend it’s un-American to stop anyone from raking in as many billions as they wish. Well, that might have once been the case. But opinion polls show a shift in attitudes. Americans are becoming fed up with the power exercised by the ultrawealthy, and the Democrats are poised to take advantage. ― Lawrence Martin

CBC’s problem is complacency, not Netflix ‘imperialism’

As a citizen, a consumer and a journalist keeping an eye on the Canadian TV racket, I sympathize with CBC boss Catherine Tait’s expression of anguish. Netflix is rich, powerful and internationally renowned. It knows no boundaries and essentially it scoffs at international barriers. But if you want Netflix to take Canadian content with a seriousness that involves regulations and specific commitments of the kind familiar in Canadian TV for decades, take that up with the government. It is unwise and unfair to make the public feel guilty about enjoying Netflix. ― John Doyle

Globe editorial: Hey Canada, mind the data gap

Mention of data tends to spook people these days. Digital giants such as Google and Facebook scoop up the endless cascade of facts that we reveal about ourselves online – our location, what we buy, where we browse – and sell them to advertisers and political campaigns. The all-seeing eye of Silicon Valley has rather too much data about each of us. But the missing government facts are different. They’re not about individuals but about Canadians in the aggregate. The information isn’t needed to sell things to you. It’s needed to make better government decisions for a community. ― Globe Editorial

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LIVING BETTER

Portuguese wines have grown up. Here are nine smart buys

The Globe’s Wine and Spirits columnist Beppi Crosariol dives into the wines of Portugal in this week’s column, pointing out that something has been drawing more people to the Portuguese wine category. For example, shipments to Canada in rose to 8.7 million litres from 6.6 million litres, an increase of 32 per cent, between 2013 and 2017, and interim figures for 2018 suggest the trend is continuing. Beppi says Portuguese wines have been evolving, shedding rustic flavours as well as overripe, sunburned, raisiny characters.

He suggests that if you haven’t tried a Portuguese wine in a while, you should try one of the nine bottles he’s reviewed.

Delicious salad as a side dish

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Lucy Waverman’s tip on how to make a great salad in winter

Most lettuce is not in season in winter and what you find is of debatable quality. However, by using sweet potatoes, apples, beets, Jerusalem artichokes, mushrooms, cactus pears, tamarillos and various citrus such as blood oranges and Meyer lemons, salads become more substantial and more stimulating.

LONG READS FOR A LONG COMMUTE

Pumpjacks at work pumping crude oil near Halkirk, Alberta. Pipeline snarls remain a key concern among the largest producers in Alberta’s oil patch, even as the sharp increase in rail capacity and concerted efforts to expand current export outlets has narrowed the discount on Canadian heavy crude.

Larry MacDougal/The Canadian Press

Battered oil patch could face further financial woes after Supreme Court cleanup ruling

Canada’s battered oil patch could face another financial hit as banks assess whether to reduce producers’ borrowing capacity after a top court judgment that ranks environmental cleanup above secured creditors’ claims in bankruptcy cases. Mergers and acquisitions reporter Jeffrey Jones reports on last week’s Supreme Court ruling that determined even when an oil company is insolvent they still have to clean up their mess. That’ll mean any funds left must go first to cleaning up and reclaiming spent and non-commercial wells before lenders can recoup their investments. The ruling in what is known as the Redwater case could bring further chill to an industry in which the ability of companies, especially smaller ones, to borrow money has shrunk through four years of weak prices for oil and gas and squelched cash flows.

Evening Update is written by Michael Snider. If you’d like to receive this newsletter by e-mail every weekday evening, go here to sign up. If you have any feedback, send us a note.

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Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

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