6 ms·

Ponzi Schemes, Private Yachts, and a Missing $250M in Crypto: Quadriga

82 points by SirLJ 7y ago

TaylorGood 7y ago
What a read! Love long-form journalism. Too many indicators that he planned an exit and is still alive.
EddieCPU 7y ago
How could anyone be taken in by these kind of shysters and keeping your coins in someone else crypto-exchange kinda defeats the whole concept.
- nikanj 7y ago
  For the vast majority of late-game investors, the whole concept was ”You put in $100 and make $10,000,000”
- Scoundreller 7y ago
  At some point, you gotta send cash to them or get cash out from them (unless you want to deal with randoms, but localbitcoins has its risks too). But no real excuse for those holding coins/cash on an exchange for a second longer than necessary.
neonate 7y ago
http://archive.is/IEKmz http://archive.is/IEKmz
lobster45 7y ago
How many times had this happened? The exchange in Japan and many others had issues
- Scoundreller 7y ago
  Why limit your scope to crypto? This kind of thing has happened long before it, and will happen again and again. It's probably happening right now.
- damian2000 7y ago
  https://selfkey.org/list-of-cryptocurrency-exchange-hacks/ https://selfkey.org/list-of-cryptocurrency-exchange-hacks/
lightedman 7y ago
I've been in prison and my first thought here is "Absolute Fraud." My first thought for cryptocurrency when it first came out was "Oh, look, easy money if I felt like throwing my scruples and morals aside and actively participate in this!" I'm still broke, so obviously I didn't sell myself out. Meanwhile many others I know who got involved in this are now facing IRS Audits and in one case criminal charges. I'm somewhat glad my foresight saved me from ever making more than like fifteen cents and a couple 'free' pizzas off of this stuff years and years ago and getting potential charges. Knowing the disasters of a distributed database that works without explicit human permissions and checks like what we did in the late 70s, I dodged a big bullet, IMHO.
- seibelj 7y ago
  I’ve never been to prison and cryptocurrency and blockchain have been my career for the past 4 years. Not sure we should be taking advice from your anecdotes. There is nothing illegal about cryptocurrency - New York even issues a Bit License specifically to allow it. Maybe you should read more about the industry?
  - exogeny 7y ago
    Crypto reminds me so much of the dot-com boom in the late 1990s. Massive amounts of interest, amazing and potentially life-changing innovation, overrun with fraud they completely obliterates public confidence. I’m not a big crypto guy, but a lot of the problems of it seem to be baked in: the decentralization of it attracts a slew of Libertarian types who believe that if someone gets scammed, it’s their fault. There has to be what, thousands of coins? How many are legitimate operations? It sucks because the promise of the technology is held back so much by all of this fraud, and from what I see, people are so reticent to call it what it is because they’re financially tied to the sector. But there is really zero public confidence in this space - and even less in terms of realistic use cases for everyday people - that stories like this feel like another nail in the coffin.
    - Nuzzerino 7y ago
      Even the legitimate operations are overrun with incompetence. The lack of accountability and easy fundraising is a recipe for charlatans who have no business running a business.
NelsonMinar 7y ago
With this much fraud in the founders' background surely the benefit of the doubt about the disappearance of $250M and the founder shifts from "gosh what bad luck" to "there's malfeasance involved here". But the one thing that gives me pause is a Globe & Mail investigative piece confirming Cotten's death. They looked hard, in India, and the story held up. Then again maybe the reporters just got hoodwinked. https://www.theglobeandmail.com/world/article-how-did-gerald-cotten-die-a-quadriga-mystery-from-india-to-canada/ https://www.theglobeandmail.com/world/article-how-did-gerald...
- perl4ever 7y ago
  Well, it's entirely possible that he was going to abscond with the money and he just randomly died. Everybody's got to die at least once.
- Lazare 7y ago
  Well, yes. The original story ("Cotten was honest, Quadriga was on the up and up, Cotten just randomly died and weirdly was the only one who had access to the funds") has been disproven ten times over. So no, no benefit of the doubt here; obviously there was some sort of scam going on. The question is, what? There's a lot of possibilities! And a lot of them would involve Cotten being really, truly dead, so the Globe and Mail investigation, even if accurate, doesn't narrow things down much.
elliekelly 7y ago
> He neglected to disclose, however, that he filled those fake accounts with invented funds, trading counterfeit Bitcoin for real Bitcoin and Canadian and American dollars. What is “counterfeit Bitcoin”?
- arthurcolle 7y ago
  Could be "ledger entries" in the crypto exchange's database with no real world corresponding BTC on the actual Blockchain. Imagine you log into an exchange, deposit another crypto like LTC, exchange it for "BTC" and never actually withdraw it. how can you be sure that there is actual BTC behind your account?
  - hanniabu 7y ago
    This is correct
  - damian2000 7y ago
    Exactly - done in order to fake volume - so it looks like your exchange is doing a lot more business than it really is. Also to manipulate the bitcoin price on your exchange, although it would be difficult to make significant moves due to arbitrage.

82 points by SirLJ 7y ago

What a read! Love long-form journalism. Too many indicators that he planned an exit and is still alive.

How could anyone be taken in by these kind of shysters and keeping your coins in someone else crypto-exchange kinda defeats the whole concept.

nikanj 7y ago
For the vast majority of late-game investors, the whole concept was ”You put in $100 and make $10,000,000”
Scoundreller 7y ago
At some point, you gotta send cash to them or get cash out from them (unless you want to deal with randoms, but localbitcoins has its risks too). But no real excuse for those holding coins/cash on an exchange for a second longer than necessary.

neonate 7y ago

http://archive.is/IEKmz http://archive.is/IEKmz

lobster45 7y ago

How many times had this happened? The exchange in Japan and many others had issues

Scoundreller 7y ago
Why limit your scope to crypto? This kind of thing has happened long before it, and will happen again and again. It's probably happening right now.
damian2000 7y ago
https://selfkey.org/list-of-cryptocurrency-exchange-hacks/ https://selfkey.org/list-of-cryptocurrency-exchange-hacks/

lightedman 7y ago

I've been in prison and my first thought here is "Absolute Fraud." My first thought for cryptocurrency when it first came out was "Oh, look, easy money if I felt like throwing my scruples and morals aside and actively participate in this!" I'm still broke, so obviously I didn't sell myself out. Meanwhile many others I know who got involved in this are now facing IRS Audits and in one case criminal charges. I'm somewhat glad my foresight saved me from ever making more than like fifteen cents and a couple 'free' pizzas off of this stuff years and years ago and getting potential charges. Knowing the disasters of a distributed database that works without explicit human permissions and checks like what we did in the late 70s, I dodged a big bullet, IMHO.

seibelj 7y ago
I’ve never been to prison and cryptocurrency and blockchain have been my career for the past 4 years. Not sure we should be taking advice from your anecdotes. There is nothing illegal about cryptocurrency - New York even issues a Bit License specifically to allow it. Maybe you should read more about the industry?
- exogeny 7y ago
  Crypto reminds me so much of the dot-com boom in the late 1990s. Massive amounts of interest, amazing and potentially life-changing innovation, overrun with fraud they completely obliterates public confidence. I’m not a big crypto guy, but a lot of the problems of it seem to be baked in: the decentralization of it attracts a slew of Libertarian types who believe that if someone gets scammed, it’s their fault. There has to be what, thousands of coins? How many are legitimate operations? It sucks because the promise of the technology is held back so much by all of this fraud, and from what I see, people are so reticent to call it what it is because they’re financially tied to the sector. But there is really zero public confidence in this space - and even less in terms of realistic use cases for everyday people - that stories like this feel like another nail in the coffin.
  - Nuzzerino 7y ago
    Even the legitimate operations are overrun with incompetence. The lack of accountability and easy fundraising is a recipe for charlatans who have no business running a business.

NelsonMinar 7y ago

With this much fraud in the founders' background surely the benefit of the doubt about the disappearance of $250M and the founder shifts from "gosh what bad luck" to "there's malfeasance involved here". But the one thing that gives me pause is a Globe & Mail investigative piece confirming Cotten's death. They looked hard, in India, and the story held up. Then again maybe the reporters just got hoodwinked. https://www.theglobeandmail.com/world/article-how-did-gerald-cotten-die-a-quadriga-mystery-from-india-to-canada/ https://www.theglobeandmail.com/world/article-how-did-gerald...

perl4ever 7y ago
Well, it's entirely possible that he was going to abscond with the money and he just randomly died. Everybody's got to die at least once.
Lazare 7y ago
Well, yes. The original story ("Cotten was honest, Quadriga was on the up and up, Cotten just randomly died and weirdly was the only one who had access to the funds") has been disproven ten times over. So no, no benefit of the doubt here; obviously there was some sort of scam going on. The question is, what? There's a lot of possibilities! And a lot of them would involve Cotten being really, truly dead, so the Globe and Mail investigation, even if accurate, doesn't narrow things down much.

elliekelly 7y ago

> He neglected to disclose, however, that he filled those fake accounts with invented funds, trading counterfeit Bitcoin for real Bitcoin and Canadian and American dollars. What is “counterfeit Bitcoin”?

arthurcolle 7y ago
Could be "ledger entries" in the crypto exchange's database with no real world corresponding BTC on the actual Blockchain. Imagine you log into an exchange, deposit another crypto like LTC, exchange it for "BTC" and never actually withdraw it. how can you be sure that there is actual BTC behind your account?
- hanniabu 7y ago
  This is correct
- damian2000 7y ago
  Exactly - done in order to fake volume - so it looks like your exchange is doing a lot more business than it really is. Also to manipulate the bitcoin price on your exchange, although it would be difficult to make significant moves due to arbitrage.