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An investigation of the QuadrigaCX situation by Twitter user @ProofofResearch has now concluded. The in-depth report finds that the exchange likely never lost access to its hot BTC wallet, and also that it was probably lying about having cold wallet reserves.
After the QuadrigaCX exchange shut down last month, it emerged that the death of its CEO may have led to the loss of almost $200 million in customer funds, due to their being stored on a wallet for which only he had access to the private keys.
Read more: Canadian crypto exchange QuadrigaCX owes $190 million to customers
As usual with any exchange closure, accusations were made that Canada's largest crypto trading platform may have been attempting to defraud its users through some kind of exit scam. The newly completed report by @ProofofResearch doesn't necessarily confirm this, but it does highlight some facts that are particularly suspsicious.
An analysis of the wallet explorer for addresses linked to QuadrigaCX show that "there are several outgoing transactions that have been made since the alleged date of Gerald Cotten’s passing" from a particular cluster address. Although not incontrovertible proof, this does cast doubt on the claim that the CEO's death is what prevented access to customer funds. This cluster address "contains over 200,000 wallet addresses that have been used by QuadrigaCX", strongly suggesting that it was the exchange's main hot wallet.
4/ It does not appear that QuadrigaCX ever lost access to their Bitcoin holdings. In fact, there's pretty indisputable proof that they have access to any and all Bitcoins in their possession currently.
— CryptoMedication (@ProofofResearch) February 3, 2019
Another claim made by QuadrigaCX was that the exchange had reserves in a cold storage wallet, in order to allow customer withdrawals at any time. The analysis of transactions strongly suggests that it "did not have a designated hot or cold wallet to send the customer their funds. In specific, they were forced to aggregate funds from disparate, disorganized locations in order to ensure that the withdrawal was successful. Since the funds came from various, unrelated customer deposits located in disparate cluster wallet addresses, it is more than likely that bitcoins which were originally apportioned for specific customers had to be redirected in order to satisfy customer withdrawals."
3/ It also appears that QuadrigaCX was using deposits from their customers to pay other customers once they requested their withdrawals - explaining crypto withdrawal delays at times. This phenomenon became much more frequent toward the end of '18.
— CryptoMedication (@ProofofResearch) February 3, 2019
ps: maybe we should figure out how to do (incentivize?) this research when exchanges *start* to be slow on withdrawals, not after their customers are completely fucked. 🤔
— Taylor Monahan (@tayvano_) February 3, 2019
Read more: What we know about the Quadriga story so far; QuadrigaCX debacle: Truth or exit scam?; the community responds