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More than $400,000 in QuadrigaCX cryptocurrency disappears into 'cold wallet'

Interested parties attend Nova Scotia Supreme Court as Canada's largest cryptocurrency exchange seeks creditor protection in the wake of the sudden death of its founder and chief executive in December and missing cryptocurrency worth roughly $190-million, in Halifax on Tuesday, Feb. 5, 2019. THE CANADIAN PRESS/Andrew Vaughan

HALIFAX — The court-appointed monitor overseeing the search for the $260 million owed to clients of the QuadrigaCX cryptocurrency exchange says it recently found more than $900,000 in digital assets — only to see more than half of it escape their grasp.

The bizarre turn of events was reported today in the first report submitted by Ernst and Young, which was appointed as monitor on Feb. 5 when the Nova Scotia Supreme Court granted the insolvent company protection from its creditors.

The report says Ernst and Young learned last week that QuadrigaCX was holding $902,743 in Bitcoin, Litecoin and Ether cryptocurrencies in so-called hot wallets — but something went wrong on Feb. 6.

The monitor’s report says QuadrigaCX “inadvertently” transferred 103 Bitcoins valued at $468,675 to so-called cold wallets, which the company is now unable to access.

Cold wallets are typically offline storage devices that are protected by encryption technology that is virtually impossible to hack.

Gerald Cotton, the company’s CEO and sole director, died suddenly while travelling in India on Dec. 9 — apparently leaving his virtual company without access to cryptocurrency stored in cold wallets.

His widow, Jennifer Robertson, has said in court documents that Cotten was the only person with access to his laptop, which is thought to contain the digital keys to the cold wallets containing the missing cryptocurrency.

The Canadian Press