Analysts to Research QuadrigaCX Issues

Reseachers found none of the users transactions led to a wallet that could be called cold
04 February 2019   501

Analysts from the CryptoMedication team shared their own research results in which they state that QuadrigaCX, which owed its customers tens of millions of dollars in cryptocurrency, could not have the stated amount. In connection with the recent events, the circumstances of the death of its owner, who allegedly took access to cold wallets with him to the grave, become even more mysterious, and QuadrigaCX itself can be one of the first confirmed examples of the cryptocurrency exchange, which practiced the partial reserve.

During the preparation of the work, the authors contacted QuadrigaCX clients and collected data on the transactions they carried out. This made it possible to identify a cluster of addresses that were under the control of the exchange and were actively used by it for arranging transfers between customers. At the same time, none of the transactions submitted by users leads to a wallet that could be called reserve or cold. Also, analysts were unable to find evidence that the exchange wallets had ever had a significant amount in bitcoins (more than 100 BTC).

The key takeaway from the deposit information provided by customers is that QuadrigaCX more than likely never held enough $BTC to account for the customer funds. In the next section, the customer withdrawal information related to $BTC transactions on the exchange reflect that QuadrigaCX was clearly re-routing payments from customers to satisfy withdrawal requests from other customers on their exchange, effectively operating a shell exchange or a ponzi.

CryptoMedication team

Analysts consider one example in which the request for withdrawing customer funds was satisfied only after the exchange received the required amount from other users.

More specifically, it appears that the exchange had attempted to create individual cluster wallets for customers at one point in time, yet found itself in a situation (more toward the end of 2018), where customer funds that had originally been apportioned for others were eventually redirected to compensate new customers requesting their withdrawals.

CryptoMedication team

CryptoMedication do not guarantee the actual conformity of their assumptions to reality, but note that in comparison with the practices used by other solvent exchanges (Coinbase, Bittrex, Bitstamp, Binance, etc.), transfer Bitcoins from one client to another in order to meet The latter’s inquiries seem "extremely wrongful and ineffective."

No less doubtful are the statements related to the impossibility of withdrawing funds from the exchange’s wallets, access to which allegedly only had the owner of the company, Gerald Cotten, who died in December. Analysts have found transfers from the purses of the exchange totaling 3.53 BTC, made on January 24-25.

They also mention Cotten’s conversation with CoinDesk in February 2015. "Gerry Cotten, the exchange’s former CEO and Owner that allegedly passed away in India nearly two months ago, stated in an interview with the publication that the exchange engaged in “extensive security measures”.," - says the publication. Currently, the QuadrigaCX management is trying to insist that it cannot pay customers, since it does not have access to cold wallets, however, the alleged presence of a multi-signature once again does not favor their version.

In the coming days, the authors of the report promise to provide additional information regarding the situation with QuadrigaCX, explaining the "slight haste" of its release by the need to publicize the available information before the exchange applies for protection from creditors 5 February.

Hacked Zaif Exchange to Resume Operations

It was hacked in September last year,  about $60 million in cryptocurrency was stolen from its platform
22 April 2019   83

Japanese cryptocurrency exchange Zaif announced that it will complete the transition from the Tech Bureau to the Fisco Digital Asset Group (FDAG) on April 22 and resume normal operation the next day, Cointelegraph reportes.

In September last year, the exchange underwent a hacker attack when about $ 60 million in cryptocurrency was stolen from its platform, including Bitcoins, Bitcoin Cash and Monacoin. As part of the compensation plan to users, FDAG exchange acquired a large stake in Zaif business and transferred to the Tech Bureau over $ 44.6 million.

According to an earlier announcement of the exchange, 40% of the lost funds will be compensated to users by Fiat, and the remaining 60% - to the cryptocurrency, which will be available for withdrawal on April 23.