WEBVTT 00:00:00.000 --> 00:00:03.319 OK, so let's set a scene. Forget about spreadsheets 00:00:03.319 --> 00:00:05.759 and stock tickers for a minute. Picture this. 00:00:06.919 --> 00:00:11.160 It's December 2018. We're in Jaipur, India. You 00:00:11.160 --> 00:00:13.339 know, the pink city. Right. It's vibrant. It's 00:00:13.339 --> 00:00:16.120 chaotic. Exactly. And it's about as far as you 00:00:16.120 --> 00:00:19.079 can get culturally and literally from the cold, 00:00:19.199 --> 00:00:22.039 snowy streets of Halifax, Nova Scotia. And inside 00:00:22.039 --> 00:00:24.420 a private hospital room in Jaipur, a 30 -year 00:00:24.420 --> 00:00:27.800 -old Canadian CEO is dying. And this isn't just 00:00:27.800 --> 00:00:30.039 any tourist who got sick. This is Gerald Cotton. 00:00:30.559 --> 00:00:33.200 The founder and CEO of Quadric ACX, which at 00:00:33.200 --> 00:00:35.000 the time was believed to be Canada's largest 00:00:35.000 --> 00:00:37.700 cryptocurrency exchange. And on his encrypted 00:00:37.700 --> 00:00:40.079 laptop, somewhere back in his hotel room, or 00:00:40.079 --> 00:00:41.759 maybe it's in the cloud, nobody's really sure 00:00:41.759 --> 00:00:44.479 at this point, are the keys. The only keys to 00:00:44.479 --> 00:00:48.359 190 million U .S. dollars. Which is, what, 250 00:00:48.359 --> 00:00:51.000 million Canadian dollars? A quarter of a billion 00:00:51.000 --> 00:00:53.899 dollars? And as his heart stops, all of that 00:00:53.899 --> 00:00:57.020 money, it just, poof. It evaporates. Well, that 00:00:57.020 --> 00:00:58.880 was the story, wasn't it? That was the initial 00:00:58.880 --> 00:01:00.920 narrative, the locked vault mystery. It was this 00:01:00.920 --> 00:01:03.479 perfect, almost mythical tech tragedy that the 00:01:03.479 --> 00:01:07.299 media just ate up in early 2019. Right. A young 00:01:07.299 --> 00:01:09.760 crypto genius dies suddenly, tragically takes 00:01:09.760 --> 00:01:12.939 the only passwords to the grave, and 115 ,000 00:01:12.939 --> 00:01:16.140 of his customers are just left stranded. It was 00:01:16.140 --> 00:01:19.120 the ultimate not your keys, not your coins, cautionary 00:01:19.120 --> 00:01:21.260 tale. You know, a story about the dangers of 00:01:21.260 --> 00:01:24.079 the digital age. But, and this is the entire 00:01:24.079 --> 00:01:26.980 point of our dick dive today, that whole narrative 00:01:26.980 --> 00:01:29.859 was a carefully constructed lie. It wasn't a 00:01:29.859 --> 00:01:32.319 case of lost keys. It was a case of an empty 00:01:32.319 --> 00:01:35.680 vault. A crime scene. And when investigators, 00:01:36.000 --> 00:01:38.599 forensic accountants, the RCMP, when they finally 00:01:38.599 --> 00:01:41.200 pried open that digital vault, they didn't find 00:01:41.200 --> 00:01:44.519 a horde of inaccessible Bitcoin. They found nothing. 00:01:44.859 --> 00:01:46.920 A vacuum. The vault wasn't locked. It had been 00:01:46.920 --> 00:01:49.519 empty for months. So today, we're untacking the 00:01:49.519 --> 00:01:52.180 collapse of Quadrigo CX. We're going to look 00:01:52.180 --> 00:01:54.400 past the headlines and into the actual mechanics 00:01:54.400 --> 00:01:56.340 of what the Ontario Securities Commission later 00:01:56.340 --> 00:01:58.819 called an old -fashioned fraud wrapped in modern 00:01:58.819 --> 00:02:02.140 technology. And we have to profile the man at 00:02:02.140 --> 00:02:05.459 the center of it all, Gerald Cotton. Not as this, 00:02:05.579 --> 00:02:08.159 you know... clumsy tech guy who forgot to write 00:02:08.159 --> 00:02:11.560 down his password. But as the the sole architect 00:02:11.560 --> 00:02:14.240 of a massive Ponzi scheme, he ran from his laptop, 00:02:14.419 --> 00:02:16.819 probably in his pajamas, from a suburb in Nova 00:02:16.819 --> 00:02:19.599 Scotia. And we also need to explore the system, 00:02:19.719 --> 00:02:22.599 the the wild west environment of early crypto 00:02:22.599 --> 00:02:24.800 that let this happen in the first place. This 00:02:24.800 --> 00:02:28.240 is a story about fake identities, shadow banks 00:02:28.240 --> 00:02:31.530 and a death that. to this very day, a lot of 00:02:31.530 --> 00:02:33.590 people are convinced was fake. Absolutely. So 00:02:33.590 --> 00:02:36.110 our mission today is to really deconstruct this. 00:02:36.229 --> 00:02:39.469 How did one guy manage to fool the entire Canadian 00:02:39.469 --> 00:02:42.530 financial ecosystem? What were the red flags? 00:02:42.750 --> 00:02:45.250 And believe me, there were so many that everyone 00:02:45.250 --> 00:02:47.689 missed. From his teenage years as a literal internet 00:02:47.689 --> 00:02:50.530 scammer. to the convicted felon he chose as his 00:02:50.530 --> 00:02:52.409 co -founder. And we want to get to the core question. 00:02:52.550 --> 00:02:54.469 Was Quadriga a legitimate business that just 00:02:54.469 --> 00:02:56.069 spiraled out of control when the market crashed, 00:02:56.250 --> 00:02:58.310 or was it a fraud from the very first line of 00:02:58.310 --> 00:02:59.969 code? All right, let's get into it. Part one, 00:03:00.069 --> 00:03:01.750 the architect in the shadow. And you have to 00:03:01.750 --> 00:03:04.330 start with Jerry, Gerald Cotton. You have to. 00:03:04.469 --> 00:03:06.650 If you go back and look at photos of him from, 00:03:06.689 --> 00:03:11.669 say, 2014, 2015, he has this look. He's the quintessential 00:03:11.669 --> 00:03:16.409 Canadian nice guy. He's got a soft, approachable 00:03:16.409 --> 00:03:18.909 face, a slightly ill -fitting suit. He doesn't 00:03:18.909 --> 00:03:20.949 look like a financial predator. No, he looks 00:03:20.949 --> 00:03:22.490 like the guy who would help you with your homework. 00:03:22.669 --> 00:03:25.289 That was his greatest asset, his camouflage. 00:03:25.449 --> 00:03:27.789 So on the surface, his background is completely 00:03:27.789 --> 00:03:30.889 clean. Born in 1988, grows up in Belleville, 00:03:30.969 --> 00:03:33.310 Ontario. He goes to a prestigious business school, 00:03:33.469 --> 00:03:36.389 Schulich at York University, graduates in 2010. 00:03:36.610 --> 00:03:39.659 I mean... On paper, he is the model of a respectable 00:03:39.659 --> 00:03:41.740 young entrepreneur. But if you start digging 00:03:41.740 --> 00:03:44.960 into his digital archaeology, his early internet 00:03:44.960 --> 00:03:47.719 footprint. a totally different person emerges, 00:03:47.780 --> 00:03:49.919 a much, much darker persona. We're talking about 00:03:49.919 --> 00:03:51.340 his teenage years, right? Yeah. Before he was 00:03:51.340 --> 00:03:53.719 ever Jerry Cotton's CEO. Exactly. While most 00:03:53.719 --> 00:03:55.719 kids his age were, I don't know, playing video 00:03:55.719 --> 00:03:57.979 games or worrying about high school, Cotton was 00:03:57.979 --> 00:04:01.159 deep in the swampy underbelly of online finance 00:04:01.159 --> 00:04:03.719 forums. Specifically a forum called TalkGold. 00:04:03.879 --> 00:04:06.360 TalkGold, yes. Which was, for anyone who doesn't 00:04:06.360 --> 00:04:08.240 know, a hub for something called high -yield 00:04:08.240 --> 00:04:12.560 investment programs or HYIPs. And high -yield 00:04:12.560 --> 00:04:14.990 investment program. It's just a polite way of 00:04:14.990 --> 00:04:17.910 saying Ponzi scheme, isn't it? It is the politest 00:04:17.910 --> 00:04:21.129 possible euphemism for a Ponzi scheme. These 00:04:21.129 --> 00:04:23.290 were websites promising, you know, absolutely 00:04:23.290 --> 00:04:25.870 insane returns, 10 percent a day, 100 percent 00:04:25.870 --> 00:04:28.470 a week. They claim they were trading gold or 00:04:28.470 --> 00:04:32.269 oil or using some secret arbitrage bot. But really, 00:04:32.370 --> 00:04:34.430 they're just using new investors money to pay 00:04:34.430 --> 00:04:36.730 off the early ones. Until the whole thing collapses 00:04:36.730 --> 00:04:39.050 and the anonymous operator vanishes with the 00:04:39.050 --> 00:04:41.689 cash. And Cotton wasn't just some gullible kid 00:04:41.689 --> 00:04:44.189 who got tricked by these. He was a player. He 00:04:44.189 --> 00:04:46.649 was a promoter. You had a handle, right? A screen 00:04:46.649 --> 00:04:48.889 name? He did. He went by Scepter. And if you 00:04:48.889 --> 00:04:51.949 read Scepter's old posts, which Internet sleuths 00:04:51.949 --> 00:04:54.329 later uncovered, you see this incredibly sharp, 00:04:54.470 --> 00:04:57.470 incredibly cynical operator. He's reviewing these 00:04:57.470 --> 00:04:59.589 schemes. He's promoting them. And he's almost 00:04:59.589 --> 00:05:01.449 certainly running a few of his own. But there's 00:05:01.449 --> 00:05:04.089 a detail here that really stands out to me. It's 00:05:04.089 --> 00:05:06.410 not just that he was participating in the scams. 00:05:06.949 --> 00:05:09.189 He was selling the tools for other people to 00:05:09.189 --> 00:05:12.790 run scams. Yes, that's such a key point. He ran 00:05:12.790 --> 00:05:15.290 a proxy service. Essentially, he sold software 00:05:15.290 --> 00:05:17.910 that allowed other operators to mask their IP 00:05:17.910 --> 00:05:20.769 addresses and hide their server locations. Which 00:05:20.769 --> 00:05:22.730 is not something you need if you're running a 00:05:22.730 --> 00:05:24.910 legitimate business. Not at all. But if you're 00:05:24.910 --> 00:05:27.990 running a Bitcoin doubler scam out of your mom's 00:05:27.990 --> 00:05:30.110 basement and you don't want the authorities knocking 00:05:30.110 --> 00:05:33.050 on your door. It's an essential piece of kit. 00:05:33.189 --> 00:05:36.569 So long before Bitcoin even really exists in 00:05:36.569 --> 00:05:39.189 the mainstream, Cotton is learning the tradecraft, 00:05:39.350 --> 00:05:42.990 anonymity, deception, how to build trust and 00:05:42.990 --> 00:05:45.569 then betray it online. He's building his fraud 00:05:45.569 --> 00:05:48.209 toolkit. And just as importantly, he's building 00:05:48.209 --> 00:05:50.810 his network. Because it was on these forums, 00:05:50.990 --> 00:05:53.029 TalkGold and others like it, that he connected 00:05:53.029 --> 00:05:55.269 with the man who had become the shadow to his 00:05:55.269 --> 00:05:57.920 architect. Michael Patron. Michael Patron. No, 00:05:57.980 --> 00:05:59.819 this guy, this guy is a whole other level. He's 00:05:59.819 --> 00:06:01.920 like a character who walked right out of a crime 00:06:01.920 --> 00:06:04.740 thriller. So when Quadriga launches in Vancouver 00:06:04.740 --> 00:06:08.220 back in 2013, Patron is the co -founder. But 00:06:08.220 --> 00:06:11.180 Michael Patron is, well, it's a made up name. 00:06:11.279 --> 00:06:14.060 It's a recent invention. His birth name was Omar 00:06:14.060 --> 00:06:17.759 Danani. And Omar Danani had a criminal record 00:06:17.759 --> 00:06:20.360 that would give any compliance officer a heart 00:06:20.360 --> 00:06:23.920 attack. To put it mildly, yes. Back in the early 00:06:23.920 --> 00:06:26.899 2000s in the U .S., Downey was part of an infamous 00:06:26.899 --> 00:06:29.500 hacking and identity theft ring called Shadow 00:06:29.500 --> 00:06:32.699 Crew. They were basically an online supermarket 00:06:32.699 --> 00:06:35.319 for stolen credit card numbers and fake IDs. 00:06:35.600 --> 00:06:38.040 And he got caught, right? Oh, yeah. The U .S. 00:06:38.060 --> 00:06:40.620 Secret Service busted the whole ring. Donnie 00:06:40.620 --> 00:06:42.939 was arrested. He pleaded guilty to conspiracy 00:06:42.939 --> 00:06:45.519 to commit identity theft and served 18 months 00:06:45.519 --> 00:06:47.899 in federal prison. Identity theft. That's a very 00:06:47.899 --> 00:06:50.500 specific area of expertise. It is. And it wasn't 00:06:50.500 --> 00:06:52.480 just that. He also had charges for burglary, 00:06:52.480 --> 00:06:54.199 grand theft. He was eventually deported back 00:06:54.199 --> 00:06:57.069 to Canada. And to try and, you know. wiped the 00:06:57.069 --> 00:06:59.329 slate clean, he started changing his name first 00:06:59.329 --> 00:07:02.290 to Omar Patron in 2003 and then again to Michael 00:07:02.290 --> 00:07:05.310 Patron in 2008. OK, so let's just pause and absorb 00:07:05.310 --> 00:07:07.829 this dynamic for a second. You have Gerald Cotton, 00:07:07.990 --> 00:07:10.029 the clean cut business school grad with a secret 00:07:10.029 --> 00:07:12.370 past as an online scammer. Right. And you have 00:07:12.370 --> 00:07:14.250 Michael Patron, the convicted identity thief 00:07:14.250 --> 00:07:17.430 and ex -con. And these are the two guys who team 00:07:17.430 --> 00:07:19.790 up to start what is essentially an unregulated 00:07:19.790 --> 00:07:22.529 bank. It was a perfect symbiotic relationship 00:07:22.529 --> 00:07:25.620 for a criminal enterprise. Patron had the criminal 00:07:25.620 --> 00:07:28.180 record, the heat. He couldn't be the public face 00:07:28.180 --> 00:07:30.459 of the company because a five second Google search 00:07:30.459 --> 00:07:32.779 would pull up his mugshot. But he knew the underworld. 00:07:33.000 --> 00:07:36.899 He had the street smarts and Cotton had the sterling 00:07:36.899 --> 00:07:38.879 reputation, the public face. He could put on 00:07:38.879 --> 00:07:40.660 a suit. He could go to the Bitcoin conferences, 00:07:40.839 --> 00:07:43.339 talk to journalists, smile and seem completely 00:07:43.339 --> 00:07:46.040 plausible. Cotton was the front man. Petrie was 00:07:46.040 --> 00:07:48.259 the architect in the shadows. In the early days, 00:07:48.399 --> 00:07:52.180 absolutely. They founded QuadrigayCX in late 00:07:52.180 --> 00:07:55.439 2013, and they made a big splash early on. They 00:07:55.439 --> 00:07:58.600 installed the second ever Bitcoin ATM in Canada 00:07:58.600 --> 00:08:01.360 in a coffee shop in Vancouver. I remember that 00:08:01.360 --> 00:08:04.879 time, 2013, 2014. That was a huge deal. It made 00:08:04.879 --> 00:08:08.899 crypto feel real, you know, tangible, not just 00:08:08.899 --> 00:08:10.660 some weird internet money. And that's exactly 00:08:10.660 --> 00:08:12.759 what they were selling, an image of legitimacy, 00:08:13.060 --> 00:08:15.939 an image of infrastructure and stability. But 00:08:15.939 --> 00:08:18.439 even back then, if you were paying close attention. 00:08:19.079 --> 00:08:21.379 the cracks were already starting to show. You're 00:08:21.379 --> 00:08:23.279 talking about that interview he did. That 2014 00:08:23.279 --> 00:08:25.060 interview, yeah. He's talking about security 00:08:25.060 --> 00:08:27.819 and he casually mentions that they store all 00:08:27.819 --> 00:08:31.800 their customer funds on paper wallets in a safety 00:08:31.800 --> 00:08:34.519 deposit box at a bank. Which, for anyone listening, 00:08:34.659 --> 00:08:38.080 is literally a piece of paper with the private 00:08:38.080 --> 00:08:40.279 keys printed on it. Right. And for you or me 00:08:40.279 --> 00:08:41.960 holding a bit of crypto, that's actually a pretty 00:08:41.960 --> 00:08:44.759 secure method. But for a financial exchange handling 00:08:44.759 --> 00:08:48.360 millions of dollars in daily volume, it is absurdly, 00:08:48.360 --> 00:08:50.559 dangerously inefficient. It's like a stock exchange 00:08:50.559 --> 00:08:52.179 saying they keep all their share certificates 00:08:52.179 --> 00:08:55.740 in a shoebox under the CEO's debt. Exactly. And 00:08:55.740 --> 00:08:57.720 Cotton even said something like, we just send 00:08:57.720 --> 00:08:59.340 money to them. We don't need to go back to the 00:08:59.340 --> 00:09:01.159 bank every time, which implies this one -way 00:09:01.159 --> 00:09:04.159 flow. Money goes into the box, but getting it 00:09:04.159 --> 00:09:07.320 out is a slow, manual process. It was a huge 00:09:07.320 --> 00:09:10.080 red flag about their liquidity. But this partnership 00:09:10.080 --> 00:09:12.779 didn't last forever. Patron eventually leaves. 00:09:13.059 --> 00:09:16.799 He does. By 2016, there's a major shift. Quadriga 00:09:16.799 --> 00:09:18.720 had tried to go public on the Canadian Securities 00:09:18.720 --> 00:09:20.559 Exchange, which would have meant opening their 00:09:20.559 --> 00:09:23.500 books for a real audit. And they failed. The 00:09:23.500 --> 00:09:25.980 deal fell through. They ran out of money. And 00:09:25.980 --> 00:09:28.159 right around that same time, all the other directors, 00:09:28.220 --> 00:09:31.059 including Mogul Patron, resigned. Leaving Jerry 00:09:31.059 --> 00:09:33.059 Cotton as the sole director. The sole director. 00:09:33.179 --> 00:09:37.240 The sole officer. the sole shareholder, the only 00:09:37.240 --> 00:09:40.340 person with the keys to the entire kingdom. From 00:09:40.340 --> 00:09:44.860 2016 onward, Quadrig SCX was a one -man show. 00:09:45.100 --> 00:09:48.379 Which brings us to part two, the operation. And 00:09:48.379 --> 00:09:50.220 really, it should be called the illusion, because 00:09:50.220 --> 00:09:53.070 the entire company... was a facade. It was pure 00:09:53.070 --> 00:09:55.269 theater. If you logged onto their website, it 00:09:55.269 --> 00:09:57.129 looked professional. You saw, you know, live 00:09:57.129 --> 00:09:59.549 price charts, trading volume, order books. You 00:09:59.549 --> 00:10:01.789 pictured a bustling office, a server room, maybe 00:10:01.789 --> 00:10:03.710 a compliance department down the hall. But the 00:10:03.710 --> 00:10:06.470 reality was just Jerry Cotton sitting on a couch 00:10:06.470 --> 00:10:08.789 in his house in Fall River, Nova Scotia, with 00:10:08.789 --> 00:10:10.889 an encrypted laptop. That was it. There was no 00:10:10.889 --> 00:10:13.610 office. There were no real employees, just a 00:10:13.610 --> 00:10:15.629 handful of remote contractors who handled customer 00:10:15.629 --> 00:10:19.080 support. And the most damning part of all. There 00:10:19.080 --> 00:10:22.259 was absolutely no accounting system. Wait, wait. 00:10:22.299 --> 00:10:25.860 Say that again. No accounting system. Yeah. You 00:10:25.860 --> 00:10:27.600 don't mean like they had bad accounting. You 00:10:27.600 --> 00:10:31.100 mean literally none. Yeah. No QuickBooks. Not 00:10:31.100 --> 00:10:34.789 even an Excel spreadsheet. Nothing. Zero. When 00:10:34.789 --> 00:10:36.590 the court -appointed monitor, Ernst & Young, 00:10:36.690 --> 00:10:38.990 came in later, they were completely baffled. 00:10:39.009 --> 00:10:41.769 There were no corporate books, no general ledger, 00:10:41.769 --> 00:10:44.629 no record of profits and losses. He was running 00:10:44.629 --> 00:10:47.570 a quarter billion dollar financial institution 00:10:47.570 --> 00:10:51.600 like a kid's lemonade stand. That is... That's 00:10:51.600 --> 00:10:53.600 just terrifying. But their biggest operational 00:10:53.600 --> 00:10:55.419 problem wasn't even the accounting. It was the 00:10:55.419 --> 00:10:57.759 banking, right? Yeah. And this is such a critical 00:10:57.759 --> 00:10:59.620 piece of the puzzle. It's central to the whole 00:10:59.620 --> 00:11:02.820 story. Because back then, the big Canadian banks, 00:11:03.059 --> 00:11:06.399 RBC, TD, Scotiabank, they hated crypto. They 00:11:06.399 --> 00:11:08.320 saw it as a massive risk for money laundering. 00:11:08.419 --> 00:11:10.360 And they just refused to deal with it. So if 00:11:10.360 --> 00:11:12.200 you're an exchange like Quadriga, you can't just 00:11:12.200 --> 00:11:14.139 walk into a BMO and open a business checking 00:11:14.139 --> 00:11:16.000 account. No, they'd shut you down in a week. 00:11:16.080 --> 00:11:18.279 Your accounts would be constantly frozen. So 00:11:18.279 --> 00:11:20.830 this creates a huge problem. How do you move 00:11:20.830 --> 00:11:23.929 millions of real Canadian dollars in and out 00:11:23.929 --> 00:11:26.350 of your exchange if no bank will touch you? You 00:11:26.350 --> 00:11:28.009 have to find a workaround. You have to go into 00:11:28.009 --> 00:11:30.070 the shadows. You end up using these third -party 00:11:30.070 --> 00:11:32.610 payment processors. And these are basically intermediary 00:11:32.610 --> 00:11:35.350 companies that act as a buffer between the crypto 00:11:35.350 --> 00:11:37.549 world and the traditional banking system. But 00:11:37.549 --> 00:11:39.250 even the legitimate ones would have standards. 00:11:39.509 --> 00:11:42.529 They do. So Cotton had to use the... absolute 00:11:42.529 --> 00:11:44.870 bottom of the barrel. Companies with names that 00:11:44.870 --> 00:11:48.350 sound fake like WB21 and Crypto Capital. And 00:11:48.350 --> 00:11:50.450 these weren't exactly reputable firms. Not even 00:11:50.450 --> 00:11:54.169 close. The CEO of WB21 was later sued by the 00:11:54.169 --> 00:11:59.149 SEC in the U .S. for $165 million fraud. Crypto 00:11:59.149 --> 00:12:01.590 Capital was a Panamanian company that got linked 00:12:01.590 --> 00:12:04.169 to the massive Bitfinex hack and was accused 00:12:04.169 --> 00:12:07.409 of laundering hundreds of millions for South 00:12:07.409 --> 00:12:09.950 American drug cartels. So these are the business 00:12:09.950 --> 00:12:12.710 partners Jerry Cotton chose. He was giving customer 00:12:12.710 --> 00:12:15.570 money to international criminals. Because they 00:12:15.570 --> 00:12:17.049 were the only ones who would do business with 00:12:17.049 --> 00:12:20.049 him. And this reliance on shady, unreliable processors 00:12:20.049 --> 00:12:22.889 led to some truly bizarre real -world consequences 00:12:22.889 --> 00:12:25.009 for customers. You're talking about the Laval 00:12:25.009 --> 00:12:27.169 incident. This story is just incredible. It's 00:12:27.169 --> 00:12:29.669 like something out of a gangster movie. Because 00:12:29.669 --> 00:12:31.750 the electronic wires and bank transfers were 00:12:31.750 --> 00:12:34.629 constantly getting frozen or delayed, Quadriga 00:12:34.629 --> 00:12:37.090 came up with a solution. They set up a physical 00:12:37.090 --> 00:12:40.529 cash pickup point. What? A physical cash pickup. 00:12:41.049 --> 00:12:44.990 in an unmarked office in Laval, Quebec. If you 00:12:44.990 --> 00:12:48.149 wanted to withdraw, say, $20 ,000, customer support 00:12:48.149 --> 00:12:50.409 would literally tell you, go to this address 00:12:50.409 --> 00:12:52.350 at this time and a guy will have an envelope 00:12:52.350 --> 00:12:54.889 of cash for you. That is unbelievable. Can you 00:12:54.889 --> 00:12:56.590 imagine your bank telling you to do that? Yeah, 00:12:56.730 --> 00:12:58.830 for your withdrawal, just meet a guy named Vinny 00:12:58.830 --> 00:13:01.149 behind the warehouse. It's insane. And customers 00:13:01.149 --> 00:13:03.509 would drive for hours to get to this nondescript 00:13:03.509 --> 00:13:05.490 building, and sometimes they'd actually get their 00:13:05.490 --> 00:13:08.110 money. But just as often, they'd arrive to find 00:13:08.110 --> 00:13:10.629 an empty office or a confused receptionist who 00:13:10.629 --> 00:13:12.570 had never heard of Quadriga. The cash just wouldn't 00:13:12.570 --> 00:13:15.419 be there. That's a five alarm fire of a red flag. 00:13:15.500 --> 00:13:17.480 It screams that the company is completely out 00:13:17.480 --> 00:13:21.399 of money. And yet, people kept depositing. Why? 00:13:21.659 --> 00:13:26.480 Two words. The 2017 boom. Ah, right. The mania. 00:13:26.480 --> 00:13:28.759 We have to remember the psychology of that year. 00:13:29.120 --> 00:13:33.000 Bitcoin started 2017 at under $1 ,000 and ended 00:13:33.000 --> 00:13:36.879 it near $20 ,000. Everybody was a genius. Everybody 00:13:36.879 --> 00:13:39.240 was getting rich. And greed makes you blind to 00:13:39.240 --> 00:13:42.019 risk. Completely. The sheer volume of new money 00:13:42.019 --> 00:13:44.399 pouring in masked all the underlying problems. 00:13:45.019 --> 00:13:47.759 Quadriga processed something like 1 .2 billion 00:13:47.759 --> 00:13:51.960 Canadian dollars in trades in 2017 alone. In 00:13:51.960 --> 00:13:54.320 a Ponzi scheme, as long as new money is coming 00:13:54.320 --> 00:13:56.179 in faster than old money is trying to get out, 00:13:56.220 --> 00:13:58.779 the illusion of solvency can be maintained. But 00:13:58.779 --> 00:14:02.860 then, then came 2018, the crash. The crypto winter. 00:14:03.639 --> 00:14:05.559 Bitcoin's price just fell off a cliff. It lost 00:14:05.559 --> 00:14:08.080 80 % of its value. And when the price crashes, 00:14:08.159 --> 00:14:09.659 what's the first thing everyone wants to do? 00:14:09.799 --> 00:14:12.179 Get their money out. Sell. Get back to the safety 00:14:12.179 --> 00:14:14.740 of cash. And suddenly that flow of money completely 00:14:14.740 --> 00:14:17.539 reverses. Everyone wants out and nobody new is 00:14:17.539 --> 00:14:19.899 coming in. The music stops. And the whole house 00:14:19.899 --> 00:14:21.980 of cards starts to wobble. It was in a death 00:14:21.980 --> 00:14:26.350 spiral for all of 2018. CIBC, one of the big 00:14:26.350 --> 00:14:30.129 banks, foes $28 million of their funds because 00:14:30.129 --> 00:14:31.789 they looked at the account and couldn't figure 00:14:31.789 --> 00:14:34.110 out who the money actually belonged to Quadriga 00:14:34.110 --> 00:14:36.629 or its customers. And the withdrawal delays went 00:14:36.629 --> 00:14:39.409 from weeks to months. The Reddit forums were 00:14:39.409 --> 00:14:43.149 on fire. Is Quadriga insolvent? Has anyone gotten 00:14:43.149 --> 00:14:46.529 their money? It was chaos. Cotton was juggling 00:14:46.529 --> 00:14:49.269 lawsuits, frozen bank accounts and an online 00:14:49.269 --> 00:14:52.110 mob of furious customers. So he's completely 00:14:52.110 --> 00:14:54.309 cornered. The walls are closing in. And in the 00:14:54.309 --> 00:14:56.529 middle of this total five alarm catastrophe, 00:14:57.029 --> 00:15:00.350 he decides to book a trip to India. Ostensibly 00:15:00.350 --> 00:15:02.970 for a honeymoon and to help open an orphanage. 00:15:03.009 --> 00:15:05.159 Which brings us to part three. The crash and 00:15:05.159 --> 00:15:07.000 the death. And this is the timeline that has 00:15:07.000 --> 00:15:09.379 launched a thousand conspiracy theories. The 00:15:09.379 --> 00:15:11.220 details here are just so, so important. They 00:15:11.220 --> 00:15:13.259 really are. So Cotton and his new wife, Jennifer 00:15:13.259 --> 00:15:15.860 Robertson, they travel to Jaipur. They check 00:15:15.860 --> 00:15:18.539 into the Oberoi Raj Vilas, which is this incredibly 00:15:18.539 --> 00:15:21.460 luxurious five -star resort. Okay. On December 00:15:21.460 --> 00:15:24.279 8th, 2018, Cotton complains of severe stomach 00:15:24.279 --> 00:15:27.080 pain and is admitted to a private hospital. The 00:15:27.080 --> 00:15:29.679 Fortis Escorts Hospital. The initial diagnosis 00:15:29.679 --> 00:15:33.039 is septic shock, peritonitis, intestinal obstruction. 00:15:33.620 --> 00:15:36.399 Now, we should say Cotton did have a documented 00:15:36.399 --> 00:15:39.019 history of Crohn's disease. Which is a serious 00:15:39.019 --> 00:15:41.279 inflammatory bowel disease, but it's not usually 00:15:41.279 --> 00:15:43.159 a death sentence for a 30 -year -old, is it? 00:15:43.470 --> 00:15:46.330 No, it's typically manageable. It's rarely fatal, 00:15:46.509 --> 00:15:49.070 especially for a young man with access to top 00:15:49.070 --> 00:15:52.090 -tier private medical care, unless it's an extremely 00:15:52.090 --> 00:15:54.590 acute complication that's been left untreated. 00:15:54.750 --> 00:15:56.950 The speed of what happened next is just shocking. 00:15:57.049 --> 00:15:59.470 He's admitted on the 8th. And he's dead on the 00:15:59.470 --> 00:16:02.620 9th, less than 24 hours later. The official cause 00:16:02.620 --> 00:16:05.299 of death is listed as cardiac arrest resulting 00:16:05.299 --> 00:16:07.899 from the complications. A death certificate is 00:16:07.899 --> 00:16:10.639 issued almost immediately on December 10th. The 00:16:10.639 --> 00:16:12.940 local police provide a no objection certificate, 00:16:13.139 --> 00:16:15.779 which is needed to transport a body, and he's 00:16:15.779 --> 00:16:17.820 embalmed and flown back to Nova Scotia for a 00:16:17.820 --> 00:16:20.399 funeral. just a few days later. It all happened 00:16:20.399 --> 00:16:23.299 incredibly fast. Now, if you just look at that 00:16:23.299 --> 00:16:26.059 in a vacuum, it's a terrible tragedy. A young 00:16:26.059 --> 00:16:28.360 man dies from a sudden medical complication while 00:16:28.360 --> 00:16:30.639 traveling. But you can't look at it in a vacuum. 00:16:30.759 --> 00:16:32.840 You have to look at what he did just before he 00:16:32.840 --> 00:16:35.799 left for that trip. 12 days before, to be exact. 00:16:36.080 --> 00:16:39.740 November 27th, 2018. Less than two weeks before 00:16:39.740 --> 00:16:42.539 he boards that flight to India, Gerald Cotton 00:16:42.539 --> 00:16:45.259 sits down with a lawyer and signs his last will 00:16:45.259 --> 00:16:48.009 and testament. And this wasn't some simple, you 00:16:48.009 --> 00:16:50.350 know, I leave everything to my wife document. 00:16:50.570 --> 00:16:54.309 This is a very specific, very detailed plan for 00:16:54.309 --> 00:16:56.850 the disbursement of his estate. His $9 .6 million 00:16:56.850 --> 00:16:59.029 personal estate, yeah. Everything went to his 00:16:59.029 --> 00:17:00.909 wife, Jennifer Robertson. The mansion in Fall 00:17:00.909 --> 00:17:03.649 River, another property out in Kelowna, B .C., 00:17:03.649 --> 00:17:07.789 a 2017 Lexus, a sailboat. Even an airplane. He 00:17:07.789 --> 00:17:09.710 owned a Cessna. And the dogs. We cannot forget 00:17:09.710 --> 00:17:11.950 the dogs. No, you can't. He specifically set 00:17:11.950 --> 00:17:15.230 up a $100 ,000 trust fund for the lifelong care 00:17:15.230 --> 00:17:17.549 of his two pet chihuahuas. So let me get this 00:17:17.549 --> 00:17:20.309 straight. He takes the time to legally secure 00:17:20.309 --> 00:17:22.970 the financial future of his dogs. Right. But 00:17:22.970 --> 00:17:25.150 the will contains absolutely no mention of the 00:17:25.150 --> 00:17:27.589 business. Nothing about the crypto keys, the 00:17:27.589 --> 00:17:30.170 passwords, or the quarter of a billion dollars 00:17:30.170 --> 00:17:34.039 belonging to his 115 ,000 customers. Not a word. 00:17:34.240 --> 00:17:37.000 It looks less like responsible estate planning 00:17:37.000 --> 00:17:40.460 and more like an exit strategy. It's a man meticulously 00:17:40.460 --> 00:17:44.119 securing his personal assets before something 00:17:44.119 --> 00:17:47.180 happens. Okay, so he dies on December 9th. But 00:17:47.180 --> 00:17:49.440 here's the part that is just indefensible from 00:17:49.440 --> 00:17:52.480 a business perspective. Quadrig ACX, the company, 00:17:52.640 --> 00:17:55.650 says nothing. Total silence. For over a month, 00:17:55.730 --> 00:17:57.789 they don't announce his death. And worse, they 00:17:57.789 --> 00:18:00.170 keep accepting deposits. They keep taking people's 00:18:00.170 --> 00:18:02.329 money. All through December and into January, 00:18:02.569 --> 00:18:04.630 new customers are sending money to an exchange 00:18:04.630 --> 00:18:07.529 whose CEO is dead and whose assets are supposedly 00:18:07.529 --> 00:18:10.450 locked forever. It's just, it's criminal. The 00:18:10.450 --> 00:18:12.190 public announcement doesn't come until January 00:18:12.190 --> 00:18:15.450 14th, 2019. This very sober post on their website 00:18:15.450 --> 00:18:18.269 is with a heavy heart that we announced the sudden 00:18:18.269 --> 00:18:20.609 passing of our founder. And that's when the crypto 00:18:20.609 --> 00:18:23.990 world just exploded. The site immediately went 00:18:23.990 --> 00:18:26.390 down for maintenance. And then on January 31st, 00:18:26.390 --> 00:18:28.569 the company officially filed for creditor protection. 00:18:28.890 --> 00:18:31.069 And this is the moment the Lost Keys narrative 00:18:31.069 --> 00:18:34.049 is born. Jennifer Robertson, his widow, files 00:18:34.049 --> 00:18:36.710 this sworn affidavit. And it basically says, 00:18:36.809 --> 00:18:39.150 Jerry ran everything from his encrypted laptop. 00:18:39.269 --> 00:18:41.430 I don't know the password. Nobody knows the password. 00:18:41.609 --> 00:18:44.650 All the money is trapped in secure, cold storage 00:18:44.650 --> 00:18:47.109 wallets. And we can't get to it. And the media, 00:18:47.190 --> 00:18:49.250 as we said, they just ran with it. It was a perfect, 00:18:49.309 --> 00:18:52.190 simple, tragic story, the absent -minded genius 00:18:52.190 --> 00:18:55.049 and his lost digital treasure. But then the professionals 00:18:55.049 --> 00:18:57.589 got involved. Then came Ernst & Young. The court 00:18:57.589 --> 00:19:00.009 appointed them as the monitor, the official investigator, 00:19:00.230 --> 00:19:03.109 and their job was simple. Find the money, crack 00:19:03.109 --> 00:19:05.670 the laptop, find a backup key, search the safety 00:19:05.670 --> 00:19:08.069 deposit boxes, whatever it takes. And this leads 00:19:08.069 --> 00:19:11.380 us to part four, the unraveling. Because what 00:19:11.380 --> 00:19:13.759 Ernst & Young found on the blockchain didn't 00:19:13.759 --> 00:19:16.920 just poke holes in the Lost Keys story. It blew 00:19:16.920 --> 00:19:19.920 it to smithereens. So EY, with the help of blockchain 00:19:19.920 --> 00:19:22.960 forensic experts, they managed to identify the 00:19:22.960 --> 00:19:26.240 six main cold wallet addresses that Quadriga 00:19:26.240 --> 00:19:28.500 supposedly used to store the vast majority of 00:19:28.500 --> 00:19:30.839 customer funds. These are the digital vaults 00:19:30.839 --> 00:19:33.440 where that $190 million was supposed to be safely 00:19:33.440 --> 00:19:35.700 sitting. That was the claim. So they look up 00:19:35.700 --> 00:19:37.960 these addresses on the public blockchain ledger. 00:19:38.039 --> 00:19:41.559 And the moment they look inside, zero. Empty. 00:19:41.660 --> 00:19:43.940 They were completely empty. Not locked. Yeah. 00:19:44.019 --> 00:19:48.460 Not inaccessible. Just empty. And here is the 00:19:48.460 --> 00:19:52.380 absolute kill shot to the official story. Forensic 00:19:52.380 --> 00:19:54.880 analysis showed that those wallets had been systematically 00:19:54.880 --> 00:19:57.240 emptied out and had been sitting empty since 00:19:57.240 --> 00:20:00.740 April of 2018. April 2018. That's eight months 00:20:00.740 --> 00:20:03.480 before Jerry Cotton died in India. Exactly. So 00:20:03.480 --> 00:20:05.980 even if he had walked out of that hospital completely 00:20:05.980 --> 00:20:08.160 healthy, even if he had given them the password 00:20:08.160 --> 00:20:10.440 on a silver platter, it wouldn't have mattered. 00:20:10.460 --> 00:20:12.799 The money was already gone. The death didn't 00:20:12.799 --> 00:20:15.000 cause the loss. The death was the event that 00:20:15.000 --> 00:20:17.180 revealed a loss that had already happened. Precisely. 00:20:17.180 --> 00:20:19.579 The death became the cover story for the theft. 00:20:20.140 --> 00:20:21.940 There was this one moment during the investigation 00:20:21.940 --> 00:20:25.039 that is just so darkly comical, it perfectly 00:20:25.039 --> 00:20:28.059 sums up the chaos and incompetence. The inadvertent 00:20:28.059 --> 00:20:30.740 transfer. Ugh, this is just painful to even talk 00:20:30.740 --> 00:20:34.079 about. So while EY is conducting its investigation, 00:20:34.460 --> 00:20:36.759 some of the remaining Quadriga contractors are 00:20:36.759 --> 00:20:38.980 trying to be helpful, trying to consolidate the 00:20:38.980 --> 00:20:41.920 few remaining funds they can find. And in the 00:20:41.920 --> 00:20:45.839 process, they accidentally trigger some old automated 00:20:45.839 --> 00:20:49.680 script that Cotton had set up. And they inadvertently 00:20:49.680 --> 00:20:54.220 transfer another 103 Bitcoin worth, about half 00:20:54.220 --> 00:20:56.740 a million Canadian dollars at the time, into 00:20:56.740 --> 00:21:00.740 one of those now infamous inaccessible cold walls. 00:21:00.779 --> 00:21:02.380 You're kidding me. They threw another half a 00:21:02.380 --> 00:21:04.019 million dollars into the black hole they were 00:21:04.019 --> 00:21:06.859 investigating. Yes. They basically compounded 00:21:06.859 --> 00:21:09.380 the loss live in real time. It was like watching 00:21:09.380 --> 00:21:11.440 a car crash in slow motion inside another car 00:21:11.440 --> 00:21:13.940 crash. It just proved that nobody but Cotton 00:21:13.940 --> 00:21:16.380 had any idea how this rickety machine was actually 00:21:16.380 --> 00:21:18.480 put together. So the big question then is obvious. 00:21:18.700 --> 00:21:21.140 The wallets are empty. Where did all the money 00:21:21.140 --> 00:21:23.059 go? Did he stash it somewhere? Is it buried in 00:21:23.059 --> 00:21:25.339 the Cayman Islands? And that question takes us 00:21:25.339 --> 00:21:28.609 to part five, the verdict. Because the Ontario 00:21:28.609 --> 00:21:31.569 Securities Commission, the OSC, conducted its 00:21:31.569 --> 00:21:34.410 own massive investigation. They released their 00:21:34.410 --> 00:21:37.650 final report in June 2020, and it left no room 00:21:37.650 --> 00:21:40.089 for ambiguity. And they had that great line, 00:21:40.289 --> 00:21:43.690 an old -fashioned fraud wrapped in modern technology. 00:21:43.690 --> 00:21:46.250 A perfect summary, because here's how the fraud 00:21:46.250 --> 00:21:48.390 actually worked. And this is where you can see 00:21:48.390 --> 00:21:51.809 the DNA of Scepter, his teenage scammer persona, 00:21:52.109 --> 00:21:55.500 all over it. So what did he do? First... Cotton 00:21:55.500 --> 00:21:58.279 created a series of fake accounts on his own 00:21:58.279 --> 00:22:01.359 Quadriga platform. He gave them aliases like 00:22:01.359 --> 00:22:05.220 Chris Marquet or Eri2D2 or Cethos. So these were 00:22:05.220 --> 00:22:06.940 basically ghost accounts that he controlled. 00:22:07.220 --> 00:22:09.640 Exactly. Then he would just go into the back 00:22:09.640 --> 00:22:11.799 -end database of the exchange and credit these 00:22:11.799 --> 00:22:13.960 accounts with millions of dollars of fictitious 00:22:13.960 --> 00:22:16.319 Canadian currency. He would just take one milzen 00:22:16.319 --> 00:22:18.339 into the balance field. He was literally printing 00:22:18.339 --> 00:22:21.160 his own money. Counterfeiting. He was printing 00:22:21.160 --> 00:22:23.640 Quadriga bucks. They weren't backed by anything. 00:22:24.880 --> 00:22:27.680 Then, and this is the genius of the scam, he 00:22:27.680 --> 00:22:30.279 would take those fake Quadriga bucks and use 00:22:30.279 --> 00:22:32.660 them to buy real cryptocurrency from his own 00:22:32.660 --> 00:22:35.099 unsuspecting customers on the platform. Oh, wow. 00:22:35.259 --> 00:22:37.619 So if I'm a regular user and I sell one Bitcoin, 00:22:37.920 --> 00:22:40.519 I think I'm trading with another real person 00:22:40.519 --> 00:22:44.500 and I get, say, 10 ,000 real Canadian dollars 00:22:44.500 --> 00:22:46.500 in my account. But you're not. You're trading 00:22:46.500 --> 00:22:48.920 with Jerry's fake alias and the $10 ,000 that 00:22:48.920 --> 00:22:51.079 appears in your account balance is just a number 00:22:51.079 --> 00:22:55.339 he typed into a database. But he loves. He now 00:22:55.339 --> 00:22:57.660 has your real Bitcoin. And what did he do with 00:22:57.660 --> 00:22:59.799 all that real crypto he was siphoning off? He 00:22:59.799 --> 00:23:02.740 transferred it off Quadriga immediately. He moved 00:23:02.740 --> 00:23:05.119 it to personal accounts he held on other competing 00:23:05.119 --> 00:23:08.619 exchanges, places like Poloniex, Kraken, Bitfinex. 00:23:08.759 --> 00:23:11.059 Okay, and this is the part that I find so psychologically 00:23:11.059 --> 00:23:13.720 interesting. He wasn't just stealing it to buy 00:23:13.720 --> 00:23:15.180 yachts and private jets, though he certainly 00:23:15.180 --> 00:23:17.980 did that too. He was gambling with it. He was 00:23:17.980 --> 00:23:21.920 a degenerate trader. An addict. The OSC's forensic 00:23:21.920 --> 00:23:24.519 analysis was incredible. They tracked the flow 00:23:24.519 --> 00:23:26.599 of funds and found that he was taking these hundreds 00:23:26.599 --> 00:23:28.960 of millions of dollars of stolen customer crypto 00:23:28.960 --> 00:23:31.779 and making massive high risk leverage trades 00:23:31.779 --> 00:23:34.160 on other platforms. He was betting on the price 00:23:34.160 --> 00:23:37.339 of other coins. He was mostly making huge bets 00:23:37.339 --> 00:23:39.940 that the price of Bitcoin would go up. He was 00:23:39.940 --> 00:23:42.599 going along with leverage. But you have to remember 00:23:42.599 --> 00:23:44.920 the timeline. This was happening through 2017 00:23:44.920 --> 00:23:48.200 and crucially 2018. When the price was crashing. 00:23:48.299 --> 00:23:50.329 When the price was. a free fall so he's betting 00:23:50.329 --> 00:23:52.650 big on black and the roulette wheel is coming 00:23:52.650 --> 00:23:55.589 up red over and over and over again and like 00:23:55.589 --> 00:23:58.490 any gambler in a hole he just digs deeper he 00:23:58.490 --> 00:24:00.890 doubles down it's the classic gambler's fallacy 00:24:00.890 --> 00:24:04.069 my luck has to turn i just need one big win to 00:24:04.069 --> 00:24:06.630 make it all back so he would steal more customer 00:24:06.630 --> 00:24:09.190 funds to make even bigger more desperate bets 00:24:09.190 --> 00:24:12.930 and he lost it all the osc calculated his trading 00:24:12.930 --> 00:24:15.529 losses alone were over a hundred million dollars 00:24:15.529 --> 00:24:18.769 so he didn't hide the money he incinerated He 00:24:18.769 --> 00:24:20.569 was just a bad trader playing with house money, 00:24:20.650 --> 00:24:22.769 except the house was his customer's life savings. 00:24:22.950 --> 00:24:25.349 He was both an embezzler and a terrible trader. 00:24:26.059 --> 00:24:29.480 He siphoned off millions to fund his lavish lifestyle, 00:24:29.819 --> 00:24:32.559 the properties, the travel, the plane. But the 00:24:32.559 --> 00:24:35.440 vast bulk of the money was just vaporized in 00:24:35.440 --> 00:24:37.660 bad market bets. Which finally explains everything. 00:24:37.880 --> 00:24:40.539 It explains why the wallets were empty. It explains 00:24:40.539 --> 00:24:42.920 why he had to operate it as a Ponzi scheme. He 00:24:42.920 --> 00:24:45.140 needed new customer deposits to pay out withdrawal 00:24:45.140 --> 00:24:48.019 requests because the original funds were already 00:24:48.019 --> 00:24:51.069 gone. And by December 2018, the hole was just 00:24:51.069 --> 00:24:53.829 too deep. The math no longer worked. There was 00:24:53.829 --> 00:24:56.990 no way out. He was completely trapped. This reality, 00:24:57.269 --> 00:25:00.950 the sort of denial tragedy of a gambling addiction, 00:25:01.190 --> 00:25:03.490 it's almost a letdown for the people who wanted 00:25:03.490 --> 00:25:05.890 a grand conspiracy. Which, of course, brings 00:25:05.890 --> 00:25:08.230 us to the conspiracy theories. Oh, yes. The exit 00:25:08.230 --> 00:25:10.650 scam. Because so many people simply refused to 00:25:10.650 --> 00:25:12.470 believe he just died of Crohn's disease. And 00:25:12.470 --> 00:25:14.849 you can understand why. On the surface, the story 00:25:14.849 --> 00:25:17.109 is compelling. You have a cornered fraudster 00:25:17.109 --> 00:25:19.730 facing decades in prison. You have a death in 00:25:19.730 --> 00:25:22.769 a foreign country where theoretically a fraudulent 00:25:22.769 --> 00:25:24.490 death certificate isn't impossible to obtain. 00:25:24.730 --> 00:25:27.509 You have a closed casket funeral. And a body 00:25:27.509 --> 00:25:30.289 that was embalmed and repatriated with incredible 00:25:30.289 --> 00:25:33.109 speed. It all just feels a little too convenient. 00:25:33.230 --> 00:25:36.470 It was so suspicious that in December of 2019, 00:25:36.809 --> 00:25:39.349 the law firm that was representing the victims 00:25:39.349 --> 00:25:43.029 sent a formal request to the RCMP, Canada's federal 00:25:43.029 --> 00:25:47.240 police force. They asked for his body to be exhumed. 00:25:47.240 --> 00:25:49.160 They wanted to dig him up and do a DNA test. 00:25:49.359 --> 00:25:52.210 Yes. They cited the questionable circumstances 00:25:52.210 --> 00:25:55.109 surrounding the death and the need to definitively 00:25:55.109 --> 00:25:57.450 confirm his identity and cause of death. And 00:25:57.450 --> 00:25:59.670 did the RCMP ever do it? No, they didn't. They 00:25:59.670 --> 00:26:01.730 reviewed the file and eventually stated that 00:26:01.730 --> 00:26:03.670 they didn't find sufficient evidence of foul 00:26:03.670 --> 00:26:07.029 play to warrant an exhumation. But that refusal, 00:26:07.109 --> 00:26:09.390 of course, just added more fuel to the conspiracy 00:26:09.390 --> 00:26:12.589 fire. To this day, there are entire online communities 00:26:12.589 --> 00:26:15.150 dedicated to the idea that Gerald Cotton is alive 00:26:15.150 --> 00:26:17.509 and well, sipping a drink on a beach somewhere 00:26:17.509 --> 00:26:19.650 under a new name. And there have been documentaries 00:26:19.690 --> 00:26:23.190 and podcasts like Exit Scam and Netflix's Trust 00:26:23.190 --> 00:26:25.210 No One that have really explored that theory 00:26:25.210 --> 00:26:27.190 in depth. I have to ask you, just based on all 00:26:27.190 --> 00:26:29.509 the evidence, what's your take? Is he alive? 00:26:29.849 --> 00:26:32.369 You know, I think it's tempting to believe the 00:26:32.369 --> 00:26:34.890 more exciting story, but looking at the facts... 00:26:35.240 --> 00:26:37.740 Krohn's complications are very real. Septic shock 00:26:37.740 --> 00:26:40.119 can kill a healthy young person incredibly quickly. 00:26:40.400 --> 00:26:42.539 And on a psychological level, this is a guy who 00:26:42.539 --> 00:26:44.500 lived his entire life online. He was addicted 00:26:44.500 --> 00:26:46.660 to the game, to the trading, to the deception. 00:26:47.220 --> 00:26:49.420 Is it really plausible that a person like that 00:26:49.420 --> 00:26:52.660 could just unplug forever? Never log in again, 00:26:52.740 --> 00:26:55.420 never make another trade. It seems unlikely to 00:26:55.420 --> 00:26:57.549 me. And there's the other point, right? If you 00:26:57.549 --> 00:26:59.829 were going to fake your death and run, why would 00:26:59.829 --> 00:27:01.769 you leave the wallets empty? Wouldn't you have 00:27:01.769 --> 00:27:04.269 $100 million stashed away in Monero somewhere 00:27:04.269 --> 00:27:07.349 first? Exactly. If it was a planned exit scam, 00:27:07.529 --> 00:27:09.589 it was the worst planned exit scam in history. 00:27:09.809 --> 00:27:12.250 He left his wife behind to face the fallout with 00:27:12.250 --> 00:27:15.170 essentially no hidden assets to draw on. That 00:27:15.170 --> 00:27:17.250 speaks more to a desperate sudden end rather 00:27:17.250 --> 00:27:19.950 than a meticulous master plan. Speaking of his 00:27:19.950 --> 00:27:22.210 wife, let's move to the aftermath. Part six, 00:27:22.390 --> 00:27:25.589 the human cost of all this. Jennifer Robertson. 00:27:25.799 --> 00:27:28.619 She has always, always maintained that she knew 00:27:28.619 --> 00:27:31.660 nothing about the fraud. Her story is that she 00:27:31.660 --> 00:27:34.559 genuinely believed Jerry was this brilliant, 00:27:34.779 --> 00:27:37.880 hardworking CEO, and she was just the supportive 00:27:37.880 --> 00:27:40.279 partner. She even wrote a book about it called 00:27:40.279 --> 00:27:43.700 Bitcoin Widow. In it, she paints herself as just 00:27:43.700 --> 00:27:46.440 another one of his victims. But the courts didn't 00:27:46.440 --> 00:27:49.019 entirely see it that way. The money she was living 00:27:49.019 --> 00:27:52.339 on, the houses, the plane, the travel, it was 00:27:52.339 --> 00:27:55.509 all proceeds of crime. So she had to give it 00:27:55.509 --> 00:27:58.250 back. She did. As part of a settlement with the 00:27:58.250 --> 00:28:00.690 bankruptcy trustee, she agreed to forfeit about 00:28:00.690 --> 00:28:04.150 $12 million worth of assets. Pretty much everything 00:28:04.150 --> 00:28:06.470 was clawed back to go into the pot for the victims. 00:28:06.750 --> 00:28:08.549 She was allowed to keep some personal items, 00:28:08.750 --> 00:28:11.250 her retirement savings, and about $90 ,000 in 00:28:11.250 --> 00:28:14.349 cash. But the life of luxury was over. And what 00:28:14.349 --> 00:28:16.970 about the actual victims, the 115 ,000 people 00:28:16.970 --> 00:28:19.869 who lost everything? It has been a long, slow, 00:28:20.009 --> 00:28:22.049 painful grind through the bankruptcy courts. 00:28:22.289 --> 00:28:25.259 These things take years. It wasn't until 2023, 00:28:25.619 --> 00:28:28.119 more than four years after the collapse, that 00:28:28.119 --> 00:28:30.140 the trustee was able to make the first interim 00:28:30.140 --> 00:28:33.700 payout to creditors. And the number is just heartbreaking. 00:28:33.920 --> 00:28:36.240 How much did they get back? About 13 cents on 00:28:36.240 --> 00:28:38.539 the dollar. 13 cents. So if you had $100 ,000, 00:28:38.920 --> 00:28:43.259 your life savings, your retirement in Quadriga, 00:28:43.259 --> 00:28:48.180 you got back. $13 ,000. Four years later. And 00:28:48.180 --> 00:28:50.259 that's just the financial loss. You can't put 00:28:50.259 --> 00:28:52.319 a number on the stress, the sleepless nights, 00:28:52.559 --> 00:28:54.539 the retirements ruined, the families put under 00:28:54.539 --> 00:28:57.859 strain. The human cost is immeasurable. It really 00:28:57.859 --> 00:29:00.500 brings us back to the central crushing irony 00:29:00.500 --> 00:29:03.259 of this whole affair. Bitcoin was invented to 00:29:03.259 --> 00:29:05.460 create a trustless financial system. The whole 00:29:05.460 --> 00:29:07.880 idea was don't trust the bankers, trust the math. 00:29:08.099 --> 00:29:10.900 And yet Quadriga collapsed because of a massive 00:29:10.900 --> 00:29:13.680 old fashioned failure of trust. It exposes what 00:29:13.680 --> 00:29:15.920 you could call the centralization paradox of 00:29:15.920 --> 00:29:18.380 crypto. The currency itself is decentralized, 00:29:18.960 --> 00:29:21.059 but for most people to actually buy it and sell 00:29:21.059 --> 00:29:23.099 it, they flock to these centralized exchanges. 00:29:23.440 --> 00:29:26.539 They ended up swapping the big regulated insured 00:29:26.539 --> 00:29:29.630 banks for... A guy named Jerry with an encrypted 00:29:29.630 --> 00:29:32.609 laptop and zero oversight. We traded regulated 00:29:32.609 --> 00:29:35.289 institutions for unregulated individuals. And 00:29:35.289 --> 00:29:37.109 it turns out individuals can be much more easily 00:29:37.109 --> 00:29:40.789 corrupted. Or they can just die. And this event, 00:29:40.849 --> 00:29:43.769 this disaster, it was a brutal wake up call for 00:29:43.769 --> 00:29:46.569 Canadian regulators. The OSC, the government, 00:29:46.650 --> 00:29:48.410 they realized they couldn't just pretend crypto 00:29:48.410 --> 00:29:51.180 didn't exist anymore. So Quadriga's collapse 00:29:51.180 --> 00:29:54.759 basically forced the industry in Canada to professionalize. 00:29:54.880 --> 00:29:58.420 In a painful way. Yes. Now, to operate a crypto 00:29:58.420 --> 00:30:00.680 exchange in Canada, you have to register with 00:30:00.680 --> 00:30:02.660 the regulators. You have to have third party 00:30:02.660 --> 00:30:05.599 custody of assets. You have to prove you have 00:30:05.599 --> 00:30:08.039 reserves. You can't trade against your own customers. 00:30:08.220 --> 00:30:11.940 It was the Titanic of Canadian crypto, the spectacular 00:30:11.940 --> 00:30:14.700 disaster that forced everyone to start building 00:30:14.700 --> 00:30:17.319 lifeboats. So as we wrap this up, I want to leave 00:30:17.319 --> 00:30:23.460 our listeners with one final provocative. We 00:30:23.460 --> 00:30:28.400 know the wallets were empty by April 2018. He 00:30:28.400 --> 00:30:31.079 died in December. For eight long months, he was 00:30:31.079 --> 00:30:33.579 running on fumes, just juggling deposits and 00:30:33.579 --> 00:30:36.420 withdrawals, robbing Peter to pay Paul. The Ponzi 00:30:36.420 --> 00:30:38.740 was mathematically at its end. The music had 00:30:38.740 --> 00:30:40.640 stopped, even if no one on the outside could 00:30:40.640 --> 00:30:42.599 hear the silence yet. So here's the question. 00:30:42.859 --> 00:30:45.839 Was Gerald Cotton's death the cause of the collapse? 00:30:46.380 --> 00:30:48.680 Or was it just the event that finally revealed 00:30:48.680 --> 00:30:51.660 a collapse that was already complete? If he hadn't 00:30:51.660 --> 00:30:53.859 gotten on that plane to India, what would the 00:30:53.859 --> 00:30:56.420 next week, the next month have looked like for 00:30:56.420 --> 00:30:58.880 him? He would have landed back in Canada and 00:30:58.880 --> 00:31:01.380 walked straight into an inferno. The lawsuits, 00:31:01.660 --> 00:31:04.220 the frozen accounts, the OSC investigation was 00:31:04.220 --> 00:31:07.700 already closing in. The collapse was 100 % inevitable. 00:31:07.960 --> 00:31:10.460 So his death, whether it was a faked exit or 00:31:10.460 --> 00:31:12.519 a tragic natural event or something in between. 00:31:13.230 --> 00:31:15.190 It wasn't the iceberg that sank the ship. No. 00:31:15.390 --> 00:31:17.549 The ship was already at the bottom of the ocean. 00:31:17.690 --> 00:31:20.410 His death was just the flare that finally lit 00:31:20.410 --> 00:31:22.890 up the wreckage for everyone to see. A sobering 00:31:22.890 --> 00:31:25.609 thought. And maybe the ultimate lesson from all 00:31:25.609 --> 00:31:28.470 this is that even in a world of trustless technology, 00:31:28.950 --> 00:31:32.069 you still have to decide who to trust. And if 00:31:32.069 --> 00:31:34.990 the answer is just one guy with a laptop, you 00:31:34.990 --> 00:31:37.450 might want to reconsider. Trust, but verify. 00:31:37.710 --> 00:31:40.089 And maybe, just maybe, don't give your money 00:31:40.089 --> 00:31:42.309 to a guy whose teenage nickname was Scepter. 00:31:42.779 --> 00:31:44.900 Good advice. That's our deep dive on the rise 00:31:44.900 --> 00:31:47.599 and fall of Quadrigacex. Thanks for joining us. 00:31:47.660 --> 00:31:47.940 Thank you.