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Gerald Cotten and Quadriga: Unraveling Crypto’s Biggest Mystery

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When Ameer and Raees Caji disappeared last week along with 69,000 bitcoins belonging to customers of their Africrypt exchange, they were continuing a time-honored crypto tradition. Since Bitcoin first appeared, there have been dozens and perhaps hundreds of “exit scams,” in which the heads of exchanges or token projects suddenly disappeared with user or investor funds.

One of the most notorious apparent “exit scams” was the collapse of Canadian exchange QuadrigaCX. In early 2019, the exchange disclosed, months after the fact, that founder Gerald Cotten had died of complications from Crohn’s disease while on a trip to India. His sudden death, according to the exchange, had cut off access to the “cold wallets” holding $145 million in customer tokens. Withdrawals were frozen and the firm eventually entered bankruptcy.

David Z. Morris is CoinDesk’s chief insights columnist.

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Angry customers and inquisitive journalists, naturally, did not take claims of Cotten’s death at face value. Instead, they started digging and quickly realized that Gerald Cotten had never been quite the upstanding citizen his clean-cut image suggested. Speculation quickly spread that Cotten had faked his death and emptied out the Quadriga piggy bank.

“Exit Scam” is a new podcast that pulls together all the strands of the complex Quadriga story into a compelling eight-part yarn. The show is produced and hosted by Aaron Lammer, also a host of the “Longform” podcast, and it offers some truly surprising insights into the case’s core question: Did Gerald Cotten really die in India from complications of Crohn’s disease? Or did he steal customer funds with plans to disappear forever?

The surprising answer that seems increasingly plausible after listening to “Exit Scam” is: “Both.”

“I think it’s been pretty well proven that Cotten was criminal in the way he operated his exchange,” says Lammer. “And he strategically extracted crypto from that exchange over time with the intent to defraud his users.”

Related: Goldman’s Crypto Chief Worries About Fraud, but Not Cryptocurrency’s Future

According to postmortem findings by auditor Ernst & Young, Cotten used fake accounts on his own exchange to buy customers’ bitcoin using Canadian dollars that didn’t exist, and then moved those stolen tokens to take risky bets on other exchanges. Cotten had also taken flying lessons and made other preparations that would have been useful for a life on the lam. His will was signed just two weeks before the ill-fated India trip, and included C$100,000 (US$81,000) left to his two dogs. Most shocking of all, the mild-mannered Canadian had a track record of deception and theft going back to his teenage years.