After the death of Gerald Cotten, founder and CEO of failed cryptocurrency exchange QuadrigaCX, customers who have balances are arguing about who should be paid first, according to a report by Coindesk.
The contention is between customers who have fiat currency balances (which are tied to actual currency) and those who have crypto balances.
“There seems to be a conflict going on between creditors themselves,” Canadian resident and QuadrigaCX customer Xitong Zou said.
Cotten apparently was the only one who had access to the company’s supposed cold storage (meaning not connected to the internet), and with his death, $190 million seems to be simply gone.
However, $50 million of the money is fiat and has been tied up by third parties, and about $140 million is crypto and missing.
QuadrigaCX recently filed for creditor protection under the Canadian Companies’ Creditors Arrangement Act (CCAA), to give itself some time to figure things out and postpone lawsuits against it.
Zou said fiat refunds should be prioritized because “from a legal standpoint you could argue that this money is not even Quadriga’s from that point, and that we could be seen as trustees rather than creditors.”
He also acknowledged that people who have more crypto will end up getting less, so he doubts that’s the direction things will go.
One anonymous customer told CoinDesk that he didn’t think fiat holders should have to share with crypto holders.
“I don’t care what value bitcoin is for someone else, my Canadian dollars [don’t] [equal] [some] amount of bitcoin,” the person said. “What happens if they find the cold wallets and the value of bitcoin apparently tripled since, are my fellow crypto investors going to share their 300 [percent] profit with me although I only had fiat? What happens if they find the cold wallets and the value of bitcoin went down. I am going to pay for other people’s bad investment?”
Further complicating the issue is the news reported on Friday (Feb. 8) that almost $1 million worth of QuadrigaCX’s ether (ETH) went to other exchanges in December, the same month Cotten died.
The ETH went to accounts at Binance, Bitfinex, Kraken and Poloniex, and no one knows whether the exchange did it or it was customers, or even a combination of the two.
Taylor Monahan, founder and CEO of the wallet startup MyCrypto, said she thinks the money may have been moved to fiat to pay some bills.
“Whether that is server bills or contractors, at some point you need cash,” said Monahan. “If you have a strained relationship with your banking partners, you may choose to obtain fiat via another mechanism. So it wouldn’t surprise me if an exchange used an [over-the-counter] desk or another exchange in the space in order to move ETH or BTC into fiat and ultimately pay bills.”