Coinbase CEO: Here’s What We Think Happened With Quadriga Exit Scam

The QuadrigaCX exchange scandal has caused a quite a furor in the crypto community. With several hundred million dollars of worth of funds ostensibly lost, investigators and users are still examining what really happened. Several theories have been floated, including one that posits that the CEO, Gerald Cotten, is still very much alive.

Now, Coinbase CEO Brian Armstrong has added his voice to the throng, making a speculative guess as to what really happened. In a long Twitter thread, Armstrong offered his thoughts on what the Coinbase team thinks happened with Quadriga:

As the tweet says, the team conducted internal research that involved blockchain analytics. First identifying clusters that were seemingly linked to the exchange’s cold storage, the Coinbase team then noticed that balances from these storage spaces were manually controlled and moved in 2018.

Noting that QuadrigaCX has been operating since 2013, Armstrong pointed out that, were this an exit scam, it would have likely been planned better. The pattern of transactions from the cold storage to them indicated the exchange’s attempt to stay afloat following difficulties in running the business, which the bear market likely contributed to.

What Armstrong seems to suggest on the whole is that Cotten’s death seemed to coincide with the exchange’s mismanagement and failing operations, which insiders used as a way to cover for the latter reasons.

So maybe after about a month of debate [Dec – Jan], management decided to cut losses and release a statement claiming that access to money was lost with CEO’s death? While this story isn’t perfect, it does seem plausible. I do want to emphasize that these are our best guesses based on the available data. As the case unfolds we might find out we were incorrect, Armstrong said.

Armstrong stressed that their theory is just speculation, and should not be taken as definitive proof of what actually transpired.

QuadrigaCX recently transferred all of its remaining funds to Big Four auditing firm Ernst and Young (EY). The latter was appointed by a court to be the Monitor, and will await further instructions from the court. Over 100,000 users have been affected by the incident and reparation costs amount to nearly $200,000.

There’s no way to tell if Coinbase’s theory is indeed what happened, but it cannot be denied that the events involved are unusual, to say the least. In the meantime, it is hoped that the legal proceedings will eventually allow users to retrieve their funds.

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