Almost $1 million worth of ETH or Ether left QuadrigaCX and went to some other crypto exchanges in December 2018, the same month in which its CEO died.
The moving of funds on QuadrigaCX
In several transactions which were sent from the hot wallet of QuadrigaCX, more than 9,000 ETH has moved from the embattled Canadian exchange to accounts of Bitfinex, Binance, Kraken, as well as Poloniex, owned by Circle.
The share of 5,000 ETH has been transferred from the 2nd of December to the 8th of December, the day before the death of the CEO and founder of QuadrigaCX, named Gerald Cotten, in India. Most of the ETH which was sent that week, about 4,400, ended up at Binance.
It is still not clear if it has been the exchange itself which initiated these transactions, or its customers, or even some combination. However, the flows of funds came under security in the cryptocurrency community as of the growing troubles of the company.
Two weeks ago, QuadrigaCX went offline and filed for creditor protection in the Supreme Court of Nova Scotia, saying that it owes the customers about $190 million but can still not find the private keys of its late founder, to retrieve crypto which is helpful in cold storage.
That followed several months of customer complaints about withdrawal delays, both for crypto and fiat. However, looking at the Ethereum blockchain, it is entirely clear that someone could move important amounts of QuadrigaCX in December.
Besides ETH, QuadrigaCX has also held a few other currencies on behalf of users and customers were trying to identify its wallets on the Bitcoin, as well as Litecoin blockchains. However, ETH is maybe the easiest one to follow the money in the case.
That is because there is actually an obvious starting point: address 0x027BEEFcBaD782faF69FAD12DeE97Ed894c68549, which is labeled as QuadrigaCX’s on the block explorer site Etherscan. It actually identifies wallets which belong to particular companies when they require it, subject to verification.
The money trail which started two years ago
The trail began in June of 2017, the last time when the publicly identified QuadrigaCX wallet has been used. It has been emptied into two other addresses. One of the two wallets has received 3,000 ETH. According to the CEO and founder of the wallet startup MyCrypto, named Taylor Monahan, this wallet is definitely a particular deposit account for another exchange of users, Bitfinex, since the funds have been regularly put into this wallet from QuadrigaCX addresses, and then sent to Bitfinex.
The last transaction from the wallet was made on the 3rd of December, 2018, sending 1,099 ETH to Bitfinex. The other wallet which has received funds from the original QuadrigaCX address is identified as the hot wallet of the exchange (0xB6AaC3b56FF818496B747EA57fCBe42A9aae6218).
Even before that, the address has been widely believed to belong to the exchange. It has been mentioned in one discussion about massive withdrawal waits in a subreddit dedicated to the exchange and in the Twitter thread about the problem. Also, it is the source of the gigantic transfers which took place in December of last year.
Transfers during December 2018
From December 2-7, the wallet sent 4,550 ETH in a few large transactions to another wallet that mostly interacted with the addresses of QuadrigaCx. During that same period, the latter wallet sent 4,550 ETH to a now-empty wallet, which is probably a deposit address for Binance, based on the pattern of use.
But, it is difficult to determine for sure whether the wallet sending ETH to the Binance deposit address has been controlled by QuadrigaCX or whether it belonged to a client that would send ETH from one exchange to another. In a few examples, funds were sent from the wallet to other different addresses.
One possible explanation about the large transfers in December is that QuadrigaCX sent the funds itself as it had to convert crypto to fiat to fund its operations. The bank account of the payment process of the exchange was frozen in 2018, blocking access to about $22 million.
There was no precise explanation about this. Binance and Poloniex were not dealing with fiat money during that period of the transactions. So, sending to the two exchanges would not have helped with the raising operational cash. Thus, the reason for the transfer remains unclear, together with its originators.
Another open question refers to the degree to which QuadrigaCX has kept coins offline, in cold storage, as we call it, where the private key is not on any device which is connected to the internet.
In the affidavit filed with the Canadian court, Jennifer Robertson, who is identified as the widow of Cotten, wrote that the company has kept just a small amount of coins in its hot wallet connected to the internet. She said that in the ordinary course of business, Cotten would move most of the coins to cold storage, adding that he also held sole responsibility for handling the funds, as well as coins, and the remaining team members have had no luck accessing the cold wallets of the exchange.
The observers tried to identify the cold wallets on the blockchain, but they were not successful.
The analysis of the ETH wallets of Quadriga does not look quite confident for the users that have their funds stuck on the exchange, with cryptocurrencies bleeding in the direction of some other exchanges.