How Weird Is It That a Company Lost Hundreds of Millions in Cryptocurrency Because Its CEO Died?

n January, the Canadian cryptocurrency exchange Quadriga announced that its CEO and founder Gerald Cotten had passed away a month earlier from complications of Crohn’s disease while on honeymoon in India. Quadriga was, at one point, Canada’s largest cryptocurrency exchange and processed billions of dollars in trades. Cotten’s death, however, revealed a critical flaw in the cryptocurrency giant’s infrastructure: He was the only person who had access to the $180 million of cryptocurrency that its users held in their accounts. Some of Quadriga’s traders are now alleging that Cotten might have faked his death in order to abscond with their funds. Lawyers representing these traders sent a letter to Canadian law enforcement on Friday asking to exhume the body in Cotten’s grave to perform an autopsy.

This, obviously, raises lots of questions about how a crypto CEO might have gone about faking his own death—as well as one that’s more technical: How is it possible that a single person had sole access to the funds of one of Canada’s biggest cryptocurrency exchanges?Cotten was able to maintain this level of control over his customers’ assets in part because Quadriga had kept most of it in “cold wallets,” or hardware that allows exchanges to store cryptocurrency offline. Exchanges typically use cold wallets as bank vaults because they’re less vulnerable to hackers than hot wallets, which are connected to the internet.
“Best practices involve putting the bulk of the funds in cold storage and keeping on hand only a small amount of coins for the day-to-day operations [of an exchange],” says Emin Gün Sirer, a computer science professor at Cornell University who co-directs the Initiative for Cryptocurrencies and Contracts.