Analysis

Taylor Monahan, the founder and CEO of MyCrypto, one of the most widely utilized non-custodial wallets in crypto, has said that QuadrigaCX may never have had an Ethereum cold wallet.

Crypto Wallet CEO Raises Questions about QuadrigaCX’s Claims

After evaluating three main Ethereum addresses used by QuadrigaCX, Monahan said that all of the addresses were likely owned by customers, not by the exchange.

“Based o[n] the actions via ShapeShift, I can only assume they were trading the ETH for BTC on Bitfinex/Poloniex as well. Regardless, these were customer funds. All 3 main addresses ultimately receive ALL customer deposits, which were then sent to a variety of exchanges,” she said.

Earlier this month, as CCN extensively reported, Canada’s largest crypto exchange QuadrigaCX lost its access to customer funds worth $190 million in crypto and fiat.

The exchange stated that its CEO, who had sole control of the exchange’s cold wallet private keys, passed away and the firm is no longer able to access the funds as a result.

Experts Skeptical Toward QuadrigaCX Case, Can $150 Million in Crypto be Recovered?

Throughout the past several days, several reports claimed that QuadrigaCX’s cold wallet addresses have been moving funds.

But, most of the addresses turned out to be hot wallets given the size of the transactions initiated by the wallets.

Large exchanges often store the majority of user funds in cold wallets that are stored offline and cannot be targeted by hackers.

Exchanges like Binance and Coinbase are known to have implemented sophisticated systems to safeguard and protect holdings stored in cold wallets.

Before initiating transactions from cold wallets, major exchanges go through weeks to even months of planning to ensure no technical mishap occurs.

The three main addresses of QuadrigaCX evaluated by MyCrypto CEO Taylor Monahan sent many transactions to different wallets including the addresses of Bitfinex and Poloniex.

Considering that cold wallets of exchanges usually deal with millions of dollars in customer funds, the several thousand ETH sent out by the three wallets show they are unlikely to be the cold wallets of QuadrigaCX.

Speaking to CCN, Monahan said she has yet to evaluate the main ETH address of QuadrigaCX that contains more than 500,000 transactions.

But, based on the pattern of the three addresses, it is entirely possible that QuadrigaCX never had an Ethereum cold wallet.

“I’m seeing NO indication of Quadriga ever having cold / reserve wallets for ETH,” Monahan said.

The MyCrypto CEO added:

“Oh, and just in case you weren’t shaking your head enough, don’t forget that Quadriga ran an exchange with KYC. They have a pile of user’s KYC data. They could turn around and open an exchange account with any of that KYC data to move money.”

Red Flags

In previous interviews, as revealed by Cornell Professor Emin Gün Sirer, former QuadrigaCX CEO Gerry Cotten claimed that the exchange employed a multi-signature system to protect user funds.

A multi-signature system allows individuals or businesses to hold private keys to a certain address. Only when the majority of the keys are combined can the individuals or businesses obtain access to the funds stored in the address.

However, the exchange evidently had not employed a multi-signature system in all of its cold wallets because it was reported that the CEO had full control over the funds.

Jesse Powell, the CEO of Kraken, also raised suspicion on the case involving QuadrigaCX given the absurdity of the situation.

“We have thousands of wallet addresses known to belong to QuadrigaCX and are investigating the bizarre and, frankly, unbelievable story of the founder’s death and lost keys. I’m not normally calling for subpoenas but if the Royal Canadian Mounted Police are looking into this, contact Kraken,” he said.

Featured Image from Shutterstock

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