Jun 11, 2020 ⋅ 2 min read
Today the Ontario Securities Commision (OSC) released a report on Quadriga, the now bankrupt cryptocurrency exchange, highlighting the firm's fraudulent operations. The review, conducted in order to determine how the platform was run, what caused its collapse, and where the money went, found that Quadriga operated like a ponzi scheme. Although it has been widely speculated that the majority of investor losses resulted from Cotten’s death and lost keys, the OSC found that most of the losses actually resulted from Cotten’s fraudulent conduct.
“The bulk of the asset shortfall—approximately $115 million—arose from Cotten's fraudulent trading on the Quadriga platform. Cotten opened Quadriga accounts under aliases and credited himself with fictitious currency and crypto asset balances which he traded with unsuspecting Quadriga clients. He sustained real losses when the price of crypto assets changed, thereby creating a shortfall in assets to satisfy client withdrawals. Cotten covered this shortfall with other clients’ deposits. In effect, this meant that Quadriga operated like a Ponzi scheme.”
Cotten not only sustained losses on his own platform, but also misappropriated clients' cryptocurrencies. The OSC found evidence that Cotten regularly moved clients’ crypto off the Quadriga platform and into accounts he had opened on other crypto trading platforms.
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