Ernst and Young, the audit giant, the court-appointed third-party monitor and now the bankruptcy trustee of the QuadrigaCX proceedings, released its fifth report on the QuadrigaCX episode. Part 1 of AMBCrypto’s coverage can be found here.
Transactional analysis carried out by the monitor revealed several details from two unnamed competing exchanges which held accounts in the name of Gerald Cotten. Following this analysis, the monitor stated that exchanges received 9,450 BTC, 387,738 ETH and 239,020 LTC from QuadrigaCX wallets between 2016-2019, with many of these holdings transferred to other cryptocurrencies, mainly Bitcoin.
The report suggested that the “activity in the Exchange Accounts,” resulted in an overall trading loss for the now-bankrupt Canadian exchange.
E&Y’s blockchain analysis further stated that the 5.6 BTC were transferred to wallet addresses controlled by Cotten, as well as a sum of 1,426.2 BTC, which were sent from the aforementioned Exchange Accounts to wallet addresses which the monitor has no information about. The report added,
“In addition, the Monitor also noted that smaller amounts of other forms of Cryptocurrency were transferred to Mr. Cotten’s wallets or wallets for which the beneficial owner was a third party or unknown person.”
On further digging, a third exchange was revealed to be providing limited information to the monitor, citing regulatory requirements and jurisdiction hindrances. Based on the transaction details obtained, 21,501 BTC were deposited with the third exchange in an account under the name of Gerald Cotten. However, the monitor is unsure if all the Bitcoins originated from QuadrigaCX.
Cotten liquidated “all the bitcoin deposited in the account on the Third Exchange,” barring 8BTC. The liquidated assets amounted to a whopping $80 million Canadian Dollars [CAD] over a period of 3 years. E&Y stated that it is “unable to account for what happened to the proceeds of the sale of the Cryptocurrency through the Third Exchange.”
A key piece of evidence over the entire proceedings was an account under the name “Chris Markay,” which processed around 95 percent of all identified account activity. The “Identified Accounts” point to 14 accounts controlled by Gerald Cotten, with no KYC information maintained under various pseudonyms. The Chris Markay Account was one such account which had over 2,500 transactions, many with the previously highlighted three competitor exchanges.
The report suggested that the Markay account had fiat deposits of over $200 million and crypto-deposits of 34,806 BTC and 540,011 ETH between 2016 and 2018. The $200 million in fiat was in three periodic movements; the first a $100 million deposit in June 2017, the second a $50 million deposit in January 2018, and the third being a series of monthly deposits of $10 million each between June and December 2018.
It should be noted that the first $100 million deposit in June 2017 coincided with QuadrigaCX stating that it lost millions of dollars in Ether, citing a technical fallacy.
Adhering to the lack of administrative information in the entire QuadrigaCX case, only 1 percent of the fiat and cryptocurrency deposits in the Chris Markay account was supported by any documentation.
The monitor independently verified the large volume of cryptocurrency that was withdrawn from QuadrigaCX, via the Chris Markay account and concluded that indeed “real Cryptocurrency was transferred out,” despite being unsupported deposits with lack of adequate documentation.
E&Y provided a summary of crypto-withdrawals through the Chris Markay account,
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