Blockchain Researcher Releases Data Driving Their QuadrigaCX Suspicions

  • Mycrypto's Taylor Monahan has released her extensive research into the known wallets of troubled exchange QuadrigaCX
  • The data, she alleges, shows little or no evidence of deposits to Cold Storage but a long list of questionable transfers to other exchanges including Poloniex, BitFinex and Shapeshift
  • Despite highlighting concerns via social and other media, Monahan urges caution regarding using data to jump to conclusions

Taylor Monahan, the CEO of open source wallet provider Mycrypto, appears to have been poring over the blockchain data related to known QuadrigaCX wallets in the past week or so. This work has led her to make some ostensibly startling discoveries regarding the way that it has been handling the multi-millions of Ethereum and Bitcoin it owes its currently locked-out clientele. 

In multiple tweetstorms and interviews, Monahan has aired her suspicions, citing evidence of a long-line of questionable transactions between Quadriga's Hot Wallets and multiple public crypto exchanges - including BitFinex, Poloniex and ShapeShift. These were most recently outlined to Laura Shin on the - aptly named - Unconfirmed podcast.   

Explaining her findings, which she began to release via Twitter almost immediately after the initial story regarding problems behind the scenes at Quadriga broke, she came to the conclusion that QuadrigaCX appears to have “Very little in the way of Cold Storage.” 

The Hot Question Of Cold Storage

This is a view that echoes the recent findings of research portal, Zerononcense , which appears to be the first to pick up the blockchain-based angle on what has been going on with the exchange. Last week, it alleged that “It does not appear that QuadrigaCX has lost access to their Bitcoin holdings. It is worth noting that there are several outgoing transactions that have been made since the alleged date of Gerald Cotten’s passing.” 

Her analysis, Monahan told Shin, is that there is “No evidence on consistent movements from know Quadriga wallets to a wallet that would fit the profile of ‘Cold Storage’.” 

What there is extensive evidence of, however, are large deposits with multiple exchanges. Monahan’s initial tweet storm on the subject, from February 4th first bought this state of affairs to light. The thread appears to expose a tranche of transactions between QuadrigaCX hot wallets and exchanges such as BitFinex, Poloniex and - most strangely, according to Monahan - ShapeShift. 

For example, she highlights a wallet that initially appeared to fit the profile of Cold Storage (multiple large deposits but relatively little movement) had actually then seen its funds redirected to BitFinex:


As Monahan explained to Shin, as you would expect, the primary movement to and from the known QuadrigaCX Hot Wallets - at least the ones revealed in a previous post by the company on Reddit following issues last year - were between Quadriga and customers. 

“Besides that, we’re seeing a lot of Ether being moved to other centralised exchanges. Primarily, Shapeshift, BitFinex and Poloniex.” 

When asked to put numbers on the amounts changing hands, Monahan elaborated by saying that “This Poloniex deposit address has received 218,000 ether - which had an equivalent balance [Monahan has priced each transaction based on the value of the Ether on that day] at the time of $7.7m.” 

The ShapeShift Situation

“All of the ShapeShift stuff,” she goes on to explain, “is actually quite terrifying…” 

“The ShapeShift number we’re seeing as 325,000 ether, with a total equivalent value at the time of transaction of nearly $20m US dollars. So, when I say ‘significant’… it’s a lot.” 

All of the data on which Monahan is basing her finding has now been released to wider community in order for them to continue where she left off. It can be viewed and downloaded here.

“I don’t really have any idea why they would ever move this money to an exchange, utilising ShapeShift is even weirder,” Monahan says.  “I really cannot understand why they would ever do this.”

Illuminating her opinion further, she adds that “ShapeShift is primarily for fast, easy transactions… So, for an exchange that is liquid and has heaps of customers trading, if they wanted to swap their Ether into Bitcoin - which is what they were doing at ShapeShift - that’s just not the place to do it because the amount they paid in fees and the higher spread on ShapeShift.”

“It just defies logic,” she concludes. 

Jumping To Conclusions?

In the hours since releasing the data, however, Monahan has been keen to deter people from taking her work and using it to jump to conclusions, however.

“I find myself making assumptions that should not be made,” she said in one tweet. The she used another to accuse fellow crypto-commentator, Zerononcense editor @ProofofResearch - who she had initially praised for the work delving into the matter -  of turning research into “baseless assumption & jumping to conclusions too quickly”.

The @ProofOfResearch account has made multiple assertions and allegations in the past few days regarding Quadriga’s actions, including what could have happened to the newly revealed missing funds highlighted in an initial report by auditors Ernst and Young

“Witch hunts are dangerous”, was Monaghan’s conclusion, however. 


At present, QuadrigaCX is offline, having applied for creditor protection while it attempts to solve “liquidity issues, which include attempts to locate and secure our very significant reserves held in cold wallets” following the death of CEO Gerald Cotten, who died in India before Christmas. 

Online investigations have somewhat focused on the ‘suspicious’ circumstances surrounding his passing - including the startlingly timed making of a will just two weeks before his passing and the time it took Quadriga to announce his passing and provide any kind of proof.

However, with those issues seemingly fading into certainty, now the story is likely to turn to a postmortem of exactly how Quadriga was run during Cotten’s life - and how exactly it came to pass that he became a single point of failure for such a large cache of crypto, or whether that is a cover for something more nefarious and ongoing regarding the use of his customer’s funds. 

Advantages of Securing IoT Devices with Blockchain, Explained By Andreas Antonopoulos

Andreas Antonopoulos, a widely-followed Bitcoin (BTC) specialist, has argued that using blockchain to solve internet of things (IoT)-related security issues may not have any significant benefits.

Antonopoulos, whose comments came during a recent Q&A session, published on May 17, 2019, said it’s possible that a traditional database management system could work just as well (as a blockchain) when it comes to securing IoT-based applications.

Logging Information From IoT Devices Using Blockchain-based Systems Could Be Beneficial

However, Antonopoulos acknowledged that distributed ledger technology (DLT)-based systems could be useful in cases where “information is logged from IoT devices in a way that it maintains that information so that it can be changed in the future … so this [would be] an immutability benefit.”

He added that many people use the term blockchain to refer to databases that are able to register digital signatures (PKIs). Antonopoulos clarified:

I think that it’s important to clarify that the purpose of a blockchain is more than recording digital signatures, [or digital timestamping]. We’ve had PKI for 25 years. There’s nothing new there and it’s not particularly interesting to take a PKI database and make it public - unless you do something with it like … building a decentralized consensus system so you can have immutability.

He continued:

And then again, what problem are you solving? What are the problems in IoT security [that you’re trying to address?] A lot of people are trying to mash these two terms (IoT and blockchain) together.

According to him, there are great security risks involved when implementing IoT-based systems.

Solar Energy Trading On Blockchains

Responding to a question about the potential benefits of using an ERC-20 compliant token, instead of just using ether (ETH), when conducting solar energy trading on the blockchain, Antonopoulos first clarified that ETH is generated by mining on the Ethereum network.

He further noted that “if you have an ERC-20 token that’s related to solar energy, then perhaps you can mine, or mint, or issue that token in response to people generating energy. So, they can earn that token directly when producing energy. But the only way you can really measure how much energy somebody is producing in order to issue a token is to buy and use that energy. And in that case, [you] could just pay in ether.”

Antonopoulos also argued that tokens are not required in all cases and that users should exercise caution when new projects are trying to offer a native token.

“Markets Are Just Human Behavior”

The data communications and distributed systems graduate from the University College London also pointed out that blockchains “operate as markets” and they operate by “using markets.” For example, there’s a market for cryptocurrency mining which is based on a blockchain network, Antonopoulos explained.

There are also markets, Antonopoulos noted, for proof-of-work (PoW)-related mining profitability and “there are currency markets within the cryptocurrency space.”

He added:

All of these markets exist because of blockchains. [Therefore,] markets are a critical application of blockchain technology. Blockchains will create better, more fair, more transparent, more open markets...wherever markets are needed. Interestingly enough, even in places where markets are needed but not wanted….[For instance,] drug markets...Why? Because drug markets are [just] markets...Markets require two things in order to happen: supply and demand....Markets are just human behavior.