Coinbase CEO: We Don't Believe QuadrigaCX Did an Exit Scam

Francisco Memoria

According to the CEO of Coinbase, the largest US-based cryptocurrency exchange, the embattled Canadian exchange QuadrigaCX could have used the death of its CEO Gerald Cotten as a way to cut its losses, after running fractional since 2017. Notably, he noted he doesn't believe it pulled an exit scam.

According to a series of tweets Brian Armstrong published, in which he emphasized this is a guess that should be taken as “pure speculation,” he revealed Coinbase has made its own internal research into the case, and initially found that QuadrigaCX had funds in cold storage being controlled manually, that were moved in early 2018.

Armstrong noted the exchange is one of the oldest in existence, as it has been running since 2013. Per his words, if they “planned an exit scam, it likely would have been timed better.” The CEO noted that QuadrigaCX suffered a “multimillion dollar bug in June 2017,” before things went wrong.

This, Armstrong added, is when movements from the exchange’s cold storage wallets started occurring.

While the Canadian exchange could, presumably, be attempting to escape its situation the 2018 bear market, that saw the price of most cryptocurrencies drop by 85%, could have seen the liquidity of its platform dry up.

Per Armstrong, the “sequence of events suggests this was a mismanagement with later attempt to cover for it.” He added:

The CEO of Coinbase added that when Gerald Cotten passed away, the exchange could’ve taken some time to debate the situation, and used it to claim it no longer had access to its money. Armstrong finished by noting that while the story isn’t perfect “it does seem plausible.”

It’s worth noting that other researchers have questioned whether QuadrigaCX ever had funds in cold storage to begin with. Moreover the researcher, MyCrypto’s Taylor Monahan, found suspicious transactions from QuadrigaCX to exchanges like Poloniex, Bitfinex, and Shapeshift, suggesting the funds could’ve been liquidated.

Monahan has urged caution regarding the use of data to jump to conclusions. Armstrong has also noted that as “the case unfolds we might find out we were incorrect.”

QuadrigaCX’s Situation

As CryptoGlobe has been covering, QuadrigaCX claims to have been locked out of $145 million in cryptocurrencies stored in cold wallets after Cotten passed away. His wife, Jennifer Robertson, has filed an affidavit where she reveals the CEO single-handedly managed the exchange’s transactions through his laptop.

Since then, the Supreme Court of Nova Scotia has granted QuadrigaCX creditor protection, and appointed Canadian law firms Miller Thomson and Cox & Palmer to represent its customers in the upcoming proceedings.

The cryptocurrency exchange claims to have run out of funds, and has recently transferred the remaining cryptocurrencies it had in its hot wallets to Ernst & Young, an auditor monitoring the case’s proceedings.

The exchange’s downfall has notably cost at least one cryptocurrency enthusiast his $420,000 life savings.

Bitcoin Hashrate Reaches All-Time High, As BTC Halving Event Approaches

Bitcoin’s (BTC) hashrate recently reached an all-time high according to data from Blockchain.com, a leading London-based block explorer service.

Bitcoin network’s hashrate, which represents the amount of computing resources being dedicated towards providing security for the cryptocurrency’s blockchain (among other uses), has been climbing steadily in the past few months.

Higher Hashrate Suggests Increased Interest in Mining Bitcoin

Available data from June 19, 2019 shows that Bitcoin’s hashrate currently stands at around 65.19 trillion hashes per second (TH/s). Notably, the BTC blockchain’s hashing power began to increase significantly as the pseudonymous cryptocurrency’s price crossed the $9,000 and then $10,000 mark.

In addition to improving the security of the Bitcoin blockchain, a higher hashrate indicates that the overall interest in mining BTC has surged - presumably due to the recovery made by the bitcoin price and also that of other major cryptoassets.

Hashrate May Be Used to “Hack Humans to Create Gold 2.0”

Commenting on the rising hashrate, Wall Street veteran and Bitcoin bull Max Keiser remarked via Twitter that an increase in hash power results in a considerable price increase for Bitcoin in most cases. Keiser believes that even some of bitcoin’s biggest supporters fail to understand the importance of hashrate.

The experienced financial analyst remarked:

[Hashrate can be thought of as] Satoshi’s ability to hack humans to create Gold 2.0.

Previous BTC Hashrate All-Time High of 60 TH/s Set in September 2018

Bitcoin’s recently recorded hashrate of over 65 TH/s is considerably greater than the previous all-time high of about 60 TH/s - which was achieved in September 2018. After reaching a new high last year, bitcoin’s hashrate had been declining steadily - as the cryptocurrency’s price also continued to plummet.

But after bitcoin’s value reached a low of around $3,150 in December 2018, the leading cryptocurrency’s price and also that of other major cryptoassets began to recover in 2019. Other key metrics used to assess the performance of the Bitcoin network have also shown marked improvement.

Less Than 16% of 21 Million Bitcoins Left to Be Mined

According to BitcoinBlockHalf data, there are only 3,220,350 bitcoins left to be mined as the Bitcoin protocol has algorithmically capped the maximum supply of BTC at 21 million. 

At present, there should be 17,779,650 bitcoins in circulation but analysts have estimated that nearly 4 million BTC has been lost due to account mismanagement - including users forgetting their private passwords to their crypto wallets.

Moreover, the Bitcoin halving is approaching (on track to take place on May 21, 2020), a critical event which reduces the number of bitcoins that can be digitally printed (from mining) by 50%. Several crypto researchers have noted that this is one of the most significant events in bitcoin’s relatively short history as the reduction in the BTC supply has had a notable impact on the crypto’s price.