Data Backup Digest

While digital currencies like Bitcoin are certainly gaining a lot of interest amongst mainstream investors and consumers alike, there's no denying the plethora of horror stories involving modern cryptocurrencies. From the bursting of the recent Bitcoin bubble to ransomware attacks involving millions of dollars in digital coinage, there's simply no denying the risks involved in digital currency.

Despite the best risk management practices, it's safe to say that nobody foresaw the death of QuadrigaCX's founder, Gerald Cotten; and nobody thought their funds would become inaccessible from the very exchange they used to secure their virtual assets in the first place.

But that's exactly what happened to the Canadian cryptocurrency exchange – and the incident left hundreds of millions of dollars in digital currency stuck in cyberspace.

A Unique Situation

Most companies have various mechanisms and controls to handle such disasters. For example, dedicated system backups are a quick and easy way to restore data that has been lost or otherwise rendered inaccessible.

Unfortunately for its 115,000 users, all of QuadrigaCX's funds were stored in Cotten's offline wallet – meaning the only way to access this virtual vault of cryptocurrency was to decrypt the file's contents. It's a process that can only be accomplished via the password – and that was stored in Cotten's own brain.

According to the final totals, the inaccessible funds held at QuadrigaCX include:

- Over $90 million in Bitcoin

- $1.3 million in Bitcoin Cash

- Over $700,000 in Bitcoin Cash SV

- Over $350,000 in Bitcoin Gold

- Almost $6.5 million in Litecoin

- Nearly $50 million in Ether

As expected, this particularly incident has left their customers fuming. Although there have been attempts to crack the decryption of Cotten's cold wallet, they have all been unsuccessful at the time of this writing – and the funds could remain inaccessible forever.

Controversy of Another Kind

While the official story released by QuadrigaCX is plausible, it's left many with a sour taste in their mouths. In fact, some critics are citing the "lawless" nature of the company in its final days as evidence of a scam. Although such claims remain to be seen, the cryptocurrency industry is one of the prime targets for online fraud in the 21st century.

Christine Dunhaime, an attorney who worked with the exchange for a brief time in 2015, was recently quoted as saying: "Gerald Cotten made the decision that he no longer wanted QuadrigaCX to be a listed company. On that day, he terminated the professionals that were, in his mind, the ‘law and order’ folks – the accountant, the auditor and me, the regulatory attorney."

Dunhaime's own company soon found themselves a target of an extortion plot involving QuadrigaCX. Although they did not give in to the demands, which called for confidential information about QuadrigaCX, Dunhaime points to this incident as another cause for concern – especially since some key witnesses are now showing hesitation to come forward with their information.

As you can see, the story about QuadrigaCX and its founder is a confusing and convoluted situation with many twists and turns. It's quite possible that we'll never learn the truth – and it's just as likely that users of QuadrigaCX will never see their funds.