Investigators trying to recover £100million deposited with Canada's largest cryptocurrency exchange before the owner died without telling anyone the password to unlock the site's digital vaults have discovered those vaults are empty.
Auditors from Ernst & Young made the shocking discovery after being called in to help dismantle QuadricaCX following CEO Gerland Cotten's death in December last year from complications of Chron's disease.
The firm says it has no idea where the missing currency has gone, but has identified 14 bogus accounts which were created from within the Quadrica system using aliases.
These accounts were used to complete a large number of transactions to cryptocurrency wallets outside of Quadrica's control and to other digital currency exchanges.
Auditors added that several deposits into these accounts may have been created artificially and then used to trade within the Quadrica exchange.
E&Y said investigators need more time to establish exactly who created these accounts and how they were used.
Auditors said they want 'to determine whether additional accounts exist, whether the deposits into the accounts were in fact artificial, how the accounts were used, the extent of net withdrawals from the Quadriga reserves and whether recipients of withdrawals can be identified.'
Laying out the results of its investigation so far, E&Y said it has identified at least six 'cold wallets' that Quadrica used to store currency deposited by users.
Cold wallets store cryptocurrency in a physical location, such as a hard drive, and are not connected to the internet, as opposed to 'hot wallets' which are.
Cold wallets function much like traditional bank vaults - storing large amounts of currency in a secure location to prevent theft.
Investigators found the wallets were commonly used to store Bitcoin starting in April 2014, but in April 2018 all but one of them were abruptly emptied and left dormant.
The final wallet was still used to transfer currency until December 3, six days before Mr Cotten died, before it was also left empty.
Investigators say Quadrica's vaults were completely emptied in April last year save for one, which was used to store currency until just a few days before Mr Cotten died. So far, they have been unable to work out where the money has gone
Auditors say interviews with staff and investors of Quadrica revealed no reason why these wallets would have fallen into disuse in April or December that year.
E&Y say they have uncovered another three potential cold wallets that Quadrica used to store cryptocurrency of different denominations to Bitcoin, but these are also empty.
So far, no other cold wallets have been uncovered.
One former Quadrica customer is now offering a reward of $100,000 for any information about where the exchange's currency reserves have gone.
Dr Alan Woodward, a security analyst from the University of Surrey, told the BBC: 'The unregulated nature of cryptocurrency exchanges, plus the fact that so many use them to hold their coins rather than just exchange them, invites fraud.'
Mr Cotten, 30, was travelling in Jaipur, India, on December 9 last year to open an orphanage when he suddenly died from complications of Chron's.
The condition causes an inflammation of the lining of the intestines and while it is uncommon to die from the disease, it can cause life-threatening complications.
Cryptocurrency exchanges such as QuadrigaCX operate as quasi-banks and have none of the safeguards of regular banks.
Users have been complaining about ‘withdrawal issues and a lack of communication’ from QuadrigaCX for months, previous reports suggested.
A statement from QuadrigaCX’s board of directors said: ‘For the past weeks, we have worked extensively to address our liquidity issues.
'[This includes] attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit. Unfortunately, these efforts have not been successful.’
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