QuadrigaCX Co-Founder Used User Deposits for His Own Trading, Created Fake Accou

[Goodcat49]

The deceased owner of the now-defunct Canadian crypto exchange QuadrigaCX was allegedly transferring user funds off the exchange and using them as a security for his own margin trading on other platforms.

The news was revealed in the fifth report from court monitor Ernst & Young (EY), filed on June 19 with the Supreme Court of Nova Scotia.

EY has outlined its principal concerns in relation to the exchange, noting that its operations were “significantly flawed from a financial reporting and operational control perspective.”

In addition to most of the activities being directed by a single individual — the now-deceased co-founder Gerald Cotton — EY notes that there was neither segregation between duties and basic internal controls, nor any segregation of assets between Quadriga’s and user funds.

In this context, EY adds, Quadriga did not have any visibility into its profitability. Users’ crypto, the report states, was not exclusively maintained in the exchange’s wallets. Moreover:

“Significant volumes of Cryptocurrency were transferred off Platform outside Quadriga to competitor exchanges into personal accounts controlled by Mr. Cotten. It appears that User Cryptocurrency was traded on these exchanges and in some circumstances used as security for a margin trading account established by Mr. Cotten.”

In addition, Cotten reportedly created fake “identified” accounts on Quadriga under multiple aliases “into which unsupported Deposits were deposited and used to trade within the platform.” This, EY, states, resulted in “inflated revenue figures, artificial trades with Users and ultimately the withdrawal of Cryptocurrency deposited by Users.”

In his trading on competitor exchanges, EY notes that Cotten incurred trading losses and incremental fees that subsequently adversely affected Quadriga’s cryptocurrency reserves.

https://cointelegraph.com/news/quadrigacx-co-founder-used-user-deposits-for-his-own-trading-created-fake-accounts