Gerald Cotten

Gerald William Cotten was born on May 11, 1988, and grew up in Belleville, Ontario, Canada.⁠[1][2]

After Cotten’s death, online investigators including a Quadriga creditor known as QCX-INT traced how, from the summer of 2003, he had been active on the TalkGold forum under the name Sceptre, promoting “high-yield investment programs” (HYIPs) that were in effect Ponzi schemes, when he was about 15; the investigators also concluded that he had already been in contact on that forum with Michael Patryn, later a Quadriga co-founder. Patryn told CBC that the two had met in person at a restaurant in Ontario, not online on a forum.⁠[2][2][2][2]

In 2010 Cotten graduated from the Schulich School of Business at York University in Toronto with a Bachelor of Business Administration degree.⁠[1][3]

In 2013 Cotten, then a recent business school graduate, incorporated Quadriga in British Columbia and named himself its sole director; the platform launched in December 2013, with the 25-year-old Cotten as founder and CEO. He said the platform met Canadians’ need for a way to buy Bitcoin. Its revenue came from trading fees charged to buyers and sellers, ranging from 0.2 to 0.5 per cent of the value of each trade.⁠[4][4][4]

Quadriga’s other co-founder, Michael Patryn, was involved with the company from its inception in 2013 until 2016; under his prior name, Omar Dhanani, he had been convicted in the United States in 2005 of conspiracy to transfer identification documents in relation to an online money-laundering service.⁠[4][4]

A 2020 investigative report by staff of the Ontario Securities Commission found that from the platform’s inception in December 2013, Cotten traded with clients through numerous alias accounts, more than 97 per cent of this trading going through an account named “Chris Markay”; through manual adjustments to the platform’s internal ledger he credited these accounts with fake fiat currency and crypto assets not backed by any real assets, for example single credits of $100 million and $50 million in 2017 and early 2018. Over the life of the platform he accumulated trading losses of more than $115 million and covered them with other clients’ assets, which the report said in effect meant Quadriga operated like a Ponzi scheme and amounted to a fraud on his clients.⁠[4][4][4][4][4][4][4]

The report also found that Quadriga’s public claims that its trading volume was genuine and that neither the platform nor its affiliates were counterparties to any trade were false and misleading: in the platform’s first full year of operation Cotten was the counterparty to at least 87 per cent of Bitcoin trades settled in Canadian dollars (by value), and 35 per cent over the platform’s lifespan, without clients’ knowledge.⁠[4][4][4][4]

In 2015 Cotten and Patryn took steps to take Quadriga public, but Cotten found the work cumbersome and abandoned the effort in early 2016. Patryn, the CFO, legal counsel and accountants then left, and Cotten became the company’s sole director and officer, retaining complete control over all of its fiat and crypto assets. Securities commission staff found that from 2016 the company had no accounting ledger and no proper system of internal oversight or controls.⁠[4][4][4][4][4][4][4]

Securities commission staff found that between May 2016 and January 2018 Cotten transferred about $24 million of client funds to himself and to Jennifer Robertson, who later became his wife, although his January 2015 employment agreement set his salary at $65,000 a year; the money paid for a Tesla and a Lexus, a luxury yacht, a plane, a share in a private jet and multiple properties, as well as frequent travel. The report regarded this as fraudulent misappropriation. He also moved client assets to accounts he had opened on other trading platforms and traded with them, losing about $28 million on three of those platforms.⁠[4][4][4][4][4][4][4][4]

Crypto asset prices soared in 2017 and the platform’s client base surged. In June that year a coding error cut off access to more than 67,000 Ether (worth about $10 million at the time of the report) held in a wallet controlled by Cotten, which remains inaccessible.⁠[4][4][4][4][4]

In January 2018 the Canadian Imperial Bank of Commerce (CIBC) froze accounts connected to Billerfy, one of Quadriga’s main payment processors, involving $26 million of client funds. Cotten publicly blamed the withdrawal problems on the freeze, but securities commission staff concluded that it was a small part of a much larger asset shortfall caused mainly by his fraudulent trading.⁠[4][4][4][4][4]

By March 2018 the platform was operating like a “revolving door”: new client deposits were immediately re-routed to fund other clients’ withdrawals. Between August and December 2018 Cotten transferred about $10 million from his personal bank account to a payment processor, which distributed it to clients.⁠[4][4][4]

In October 2018 Cotten and Jennifer Robertson married in Scotland and then planned a honeymoon in India, where they were funding the construction of an orphanage. In early December, already in India, he made two transfers totaling $500,000 from his personal account to fund client withdrawals, and then checked into the Oberoi hotel in Jaipur.⁠[4][4][4][4][4][4]

On December 8, 2018, accompanied by Robertson, Cotten was admitted to the Fortis Escorts hospital in Jaipur, and he died there the following day, December 9, at the age of 30. A hospital spokesperson confirmed his admission and death; hospital officials said he was a known case of Crohn’s disease and had suffered recurrent episodes of cardiac arrest. On December 10, the Jaipur police gave Robertson a no-objection certificate to take the body back to Nova Scotia, Canada, and the local municipal corporation issued a death certificate.⁠[5][5][5][5][5][5][5][6]

According to a statement released by Cotten’s estate, the body was embalmed and flown by a medical transportation company to New Delhi and then to Halifax, arriving on December 11; a closed-casket funeral attended by a small group of family, friends and co-workers was held on December 14.⁠[2][2][2]

More than a month after Cotten’s death, Quadriga announced it on its Facebook page on January 14, 2019, saying he had died of complications from Crohn’s disease while volunteering at an orphanage in India. During that period the exchange continued to accept customer funds as usual.⁠[7][2]

The exchange stopped operating on January 28, 2019, and on January 31 applied to the Nova Scotia Supreme Court for creditor protection. In her affidavit for the application, Robertson said Cotten had been the company’s sole officer and director, had run the business mainly from his laptop at home, and had manually performed transfers between cold and hot wallets; the computer was encrypted, she did not know the password or recovery key, and repeated searches had not found them written down. The affidavit said Quadriga had 363,000 registered users and owed a total of C$250 million to 115,000 users, and that there should be more than C$180 million of cryptocurrency in cold storage.⁠[8][9][6][6][6][6][7][7]

On February 5, 2019, Nova Scotia Supreme Court Justice Michael Wood ordered a 30-day stay precluding claims against Quadriga and appointed Ernst & Young as third-party monitor.⁠[7][7][10]

In March 2019 Ernst & Young reported its findings to the court: the six Quadriga cold wallets it had found had been emptied in April 2018, bringing their balances to nil; the monitor also found 14 accounts created by Quadriga outside the normal process using aliases, which had no corresponding real customer but traded heavily on the platform and withdrew cryptocurrency to wallet addresses not associated with Quadriga.⁠[11][11][11][11]

On April 8, 2019, a Nova Scotia judge approved moving Quadriga from creditor protection into bankruptcy proceedings, with Ernst & Young becoming bankruptcy trustee and gaining the power to compel documents and witness testimony. The monitor had already determined that Cotten mixed his personal and corporate finances; at its request, the judge the same day issued an asset preservation order covering all assets held by Robertson and the Cotten estate.⁠[10][10][10][10][10]

Under a settlement reached in October 2019, Robertson returned assets expected to be worth $12 million, including vehicles and real estate, to the bankruptcy trustee. She said she had not been aware of Cotten’s improper actions and had not participated in his trading or his appropriation of customer funds; she is not under investigation and has never faced criminal charges.⁠[4][4][12][2][12]

On December 13, 2019, the legal team representing Quadriga users in the bankruptcy proceedings wrote to the Royal Canadian Mounted Police (RCMP), citing “questionable circumstances” around his death and asking for an exhumation and post-mortem autopsy to confirm the body’s identity and the cause of death. Robertson responded through her lawyer that she was heartbroken by the request and that her husband’s death “should not be in doubt.” Although online rumours had circulated that he faked his death and absconded with the funds, no evidence of such a scheme had emerged in the year since he died.⁠[13][13][13][13][13]

On June 11, 2020, the Ontario Securities Commission published the investigative report its enforcement staff had completed over about ten months (dated April 14, 2020). The report found that QuadrigaCX’s collapse resulted from a fraud committed by its co-founder and CEO, Cotten: when the platform sought creditor protection, more than 76,000 clients were owed a combined $215 million in assets, the trustee had recovered or identified only $46 million, and clients collectively lost at least $169 million. Staff concluded that most of the shortfall did not, as widely speculated, result from crypto assets becoming lost or inaccessible after Cotten’s death, but from his fraudulent conduct: about $115 million from his fake trading on the platform and about $28 million from his unauthorized trading on external platforms.⁠[14][4][4][4][4][4][4][4][4][4][4][4]

The report also said Quadriga was already in crisis before Cotten’s death and most likely would have collapsed even if he had lived; Quadriga had not registered with any securities regulator, and the lack of registration and internal oversight allowed him to commit a large-scale fraud undetected for years. It explained that enforcement action was not practical because Cotten was dead and Quadriga bankrupt, and that its findings had not been tested before the OSC tribunal or a court and represented only staff’s view of the evidence. Robertson’s lawyer declined to comment on the report.⁠[4][4][4][4][4][4][14]

As of May 2021, only about 17,000 of roughly 76,000 creditors had filed claims, about $46 million had been recovered, and each creditor was expected to get back about 10 per cent, with the process still ongoing. The RCMP declined to comment on the exhumation request or its ongoing investigation, and the U.S. Federal Bureau of Investigation (FBI) said it would not comment until the case was closer to completion.⁠[2][2][2][2]

After Cotten’s death, investors raised a number of questions, including why the announcement was delayed by more than a month, why his name was misspelled on the death certificate, and why the funeral was closed-casket, which gave rise to speculation that he might have faked his death. No autopsy was performed after his death in India, and the gastroenterologist who treated him said he was “not sure” about the diagnosis. Cotten had told Robertson he had set up a “dead man’s switch” program that would automatically send passwords and account information if he failed to check in, but that e-mail never arrived.⁠[12][12][12][3][3][15][15]

Robertson said the delay in announcing his death was her lawyers’ decision, and that she was with Cotten, holding his hand, when he died; her lawyer also confirmed to CBC that Cotten “is most certainly dead.” As of May 2021, the RCMP had not publicly confirmed the identity of the body buried in Halifax, there was no public outcome to the exhumation request, and some creditors and journalists continued to express doubt about his death.⁠[12][12][2][2][2]