The sudden death of the Quadriga CEO, and its messy aftermath, have led to allegations of an exit scam. But his long-time friend doesn’t buy it.
By Alissa Fleck
The international crypto community has been rocked by the scandal surrounding the recent death of Gerald “Gerry” Cotten. The 30-year-old CEO’s sudden death while traveling in India has frozen investors out of approximately $190 million in owed funds, leading to allegations of an exit scam. Some have gone so far as to suggest that Cotten, who served as Quadriga’s CEO since 2013, faked his own death.
But a longtime Cotten acquaintance, Freddie Heartline, says it’s unlikely his friend would do anything of the sort.
“He was actually a really great guy,” Heartline told ICO Ranker via Facebook Messenger. “Everyone always assumes the worst when they don’t know anything.”
Heartline met Cotten in the “mid-early days in Vancouver,” when they were both founding members of the Bitcoin Co-op. Heartline was one of Quadriga’s first customers. On his Facebook page, Heartline can be seen in an old picture with Vitalik Buterin, the Russian-Canadian programmer who co-founded Ethereum.
Quadriga CX was launched in 2013 and quickly became one of Canada’s leading cryptocurrency exchanges. Like most exchanges, Quadriga kept the majority of its cryptocurrency holdings in cold wallets — an offline storage system intended to keep funds safe from hackers.
Cotten was the keeper of the digital keys to those cold wallets, according to a sworn affidavit filed by his widow and executor of his estate, Jennifer Robertson. When he died, the keys went with him.
The affidavit, filed with the Supreme Court of Nova Scotia, is part of an application by Quadriga and its parent corporation for relief under the Companies’ Creditors Arrangement Act.
“There has been a significant amount of commentary on Reddit and other web-based platforms about the state of Quadriga, Gerry’s death (including whether he is really dead) and missing coins,” Robertson wrote. She has received numerous death threats since news of the lost keys went public.
To make matters worse, damning details have emerged since the case attracted the public’s attention. Gerald Cotten’s will, for example, was signed less than two weeks prior to his death and named Robertson as sole executor. He also outlined the distribution of his assets, including real estate, an airplane and $100,000 for the care of his two Chihuahuas.
At the time of Cotten’s death, Quadriga had roughly 363,000 registered users; of those, about 115,000 held balances in their accounts. All told, the company’s obligations totaled $250 million in various currencies, based on market pricing at the time, as outlined in the affidavit.
The crypto community, not known for its sober response to crisis, has produced a number of unsubstantiated theories (a Ponzi scheme, a faked death certificate, etc.) about Quadriga and Gerald Cotten that are now swirling on Reddit boards, in Tweetstorms and on private chats. While defending his erstwhile partner, Heartline acknowledges that Quadriga users with frozen funds have good reason to be upset. Indeed, he’s among them.
“Everyone had some assets in Quadriga,” Heartline said. “[P]eople were getting ready to buy again and Quadriga was the gold standard, as in, totally trustworthy.” He points out that the exchange took a heavy loss in the Parity hack, perhaps as much as $16 million, but they “kept the doors open.”
“They were the best,” he added.
According to her affidavit, Robertson has conducted “diligent searches” aimed at finding any passwords and recovery keys that may help locate the stored coins. Apart from “a few coins” recovered by a security consultant, these efforts have so far been unsuccessful.
Yet, Heartline still has faith in his friend, and he holds out hope for a happy ending.
“[Gerry] was super conscientious and sober-minded,” he said. “He was a rational guy, we just don’t know the answers yet. There is a better than 50% chance this issue will end positively.”
Cotten, appearing in this video, helped launch the second Bitcoin ATM in Vancouver at Quadriga’s headquarters.
Specifically, Heartline believes that Cotten, who was not a coder, had a backup plan for an event such as his untimely death.
“The probability factor leans toward a favorable outcome,” he said.
Cotten’s death is not the first time Quadriga has faced legal trouble. In October of 2018, The company entered into a dispute with the CIBC (Canadian Imperial Bank of Commerce) based on difficulties the exchange was having with its payment processor, Costodian Inc.
For months, exchange users have been reporting difficulties in accessing funds stored on the exchange.