OK, so let's set a scene. Forget about spreadsheets
and stock tickers for a minute. Picture this.
It's December 2018. We're in Jaipur, India. You
know, the pink city. Right. It's vibrant. It's
chaotic. Exactly. And it's about as far as you
can get culturally and literally from the cold,
snowy streets of Halifax, Nova Scotia. And inside
a private hospital room in Jaipur, a 30 -year
-old Canadian CEO is dying. And this isn't just
any tourist who got sick. This is Gerald Cotton.
The founder and CEO of Quadric ACX, which at
the time was believed to be Canada's largest
cryptocurrency exchange. And on his encrypted
laptop, somewhere back in his hotel room, or
maybe it's in the cloud, nobody's really sure
at this point, are the keys. The only keys to
190 million U .S. dollars. Which is, what, 250
million Canadian dollars? A quarter of a billion
dollars? And as his heart stops, all of that
money, it just, poof. It evaporates. Well, that
was the story, wasn't it? That was the initial
narrative, the locked vault mystery. It was this
perfect, almost mythical tech tragedy that the
media just ate up in early 2019. Right. A young
crypto genius dies suddenly, tragically takes
the only passwords to the grave, and 115 ,000
of his customers are just left stranded. It was
the ultimate not your keys, not your coins, cautionary
tale. You know, a story about the dangers of
the digital age. But, and this is the entire
point of our dick dive today, that whole narrative
was a carefully constructed lie. It wasn't a
case of lost keys. It was a case of an empty
vault. A crime scene. And when investigators,
forensic accountants, the RCMP, when they finally
pried open that digital vault, they didn't find
a horde of inaccessible Bitcoin. They found nothing.
A vacuum. The vault wasn't locked. It had been
empty for months. So today, we're untacking the
collapse of Quadrigo CX. We're going to look
past the headlines and into the actual mechanics
of what the Ontario Securities Commission later
called an old -fashioned fraud wrapped in modern
technology. And we have to profile the man at
the center of it all, Gerald Cotton. Not as this,
you know... clumsy tech guy who forgot to write
down his password. But as the the sole architect
of a massive Ponzi scheme, he ran from his laptop,
probably in his pajamas, from a suburb in Nova
Scotia. And we also need to explore the system,
the the wild west environment of early crypto
that let this happen in the first place. This
is a story about fake identities, shadow banks
and a death that. to this very day, a lot of
people are convinced was fake. Absolutely. So
our mission today is to really deconstruct this.
How did one guy manage to fool the entire Canadian
financial ecosystem? What were the red flags?
And believe me, there were so many that everyone
missed. From his teenage years as a literal internet
scammer. to the convicted felon he chose as his
co -founder. And we want to get to the core question.
Was Quadriga a legitimate business that just
spiraled out of control when the market crashed,
or was it a fraud from the very first line of
code? All right, let's get into it. Part one,
the architect in the shadow. And you have to
start with Jerry, Gerald Cotton. You have to.
If you go back and look at photos of him from,
say, 2014, 2015, he has this look. He's the quintessential
Canadian nice guy. He's got a soft, approachable
face, a slightly ill -fitting suit. He doesn't
look like a financial predator. No, he looks
like the guy who would help you with your homework.
That was his greatest asset, his camouflage.
So on the surface, his background is completely
clean. Born in 1988, grows up in Belleville,
Ontario. He goes to a prestigious business school,
Schulich at York University, graduates in 2010.
I mean... On paper, he is the model of a respectable
young entrepreneur. But if you start digging
into his digital archaeology, his early internet
footprint. a totally different person emerges,
a much, much darker persona. We're talking about
his teenage years, right? Yeah. Before he was
ever Jerry Cotton's CEO. Exactly. While most
kids his age were, I don't know, playing video
games or worrying about high school, Cotton was
deep in the swampy underbelly of online finance
forums. Specifically a forum called TalkGold.
TalkGold, yes. Which was, for anyone who doesn't
know, a hub for something called high -yield
investment programs or HYIPs. And high -yield
investment program. It's just a polite way of
saying Ponzi scheme, isn't it? It is the politest
possible euphemism for a Ponzi scheme. These
were websites promising, you know, absolutely
insane returns, 10 percent a day, 100 percent
a week. They claim they were trading gold or
oil or using some secret arbitrage bot. But really,
they're just using new investors money to pay
off the early ones. Until the whole thing collapses
and the anonymous operator vanishes with the
cash. And Cotton wasn't just some gullible kid
who got tricked by these. He was a player. He
was a promoter. You had a handle, right? A screen
name? He did. He went by Scepter. And if you
read Scepter's old posts, which Internet sleuths
later uncovered, you see this incredibly sharp,
incredibly cynical operator. He's reviewing these
schemes. He's promoting them. And he's almost
certainly running a few of his own. But there's
a detail here that really stands out to me. It's
not just that he was participating in the scams.
He was selling the tools for other people to
run scams. Yes, that's such a key point. He ran
a proxy service. Essentially, he sold software
that allowed other operators to mask their IP
addresses and hide their server locations. Which
is not something you need if you're running a
legitimate business. Not at all. But if you're
running a Bitcoin doubler scam out of your mom's
basement and you don't want the authorities knocking
on your door. It's an essential piece of kit.
So long before Bitcoin even really exists in
the mainstream, Cotton is learning the tradecraft,
anonymity, deception, how to build trust and
then betray it online. He's building his fraud
toolkit. And just as importantly, he's building
his network. Because it was on these forums,
TalkGold and others like it, that he connected
with the man who had become the shadow to his
architect. Michael Patron. Michael Patron. No,
this guy, this guy is a whole other level. He's
like a character who walked right out of a crime
thriller. So when Quadriga launches in Vancouver
back in 2013, Patron is the co -founder. But
Michael Patron is, well, it's a made up name.
It's a recent invention. His birth name was Omar
Danani. And Omar Danani had a criminal record
that would give any compliance officer a heart
attack. To put it mildly, yes. Back in the early
2000s in the U .S., Downey was part of an infamous
hacking and identity theft ring called Shadow
Crew. They were basically an online supermarket
for stolen credit card numbers and fake IDs.
And he got caught, right? Oh, yeah. The U .S.
Secret Service busted the whole ring. Donnie
was arrested. He pleaded guilty to conspiracy
to commit identity theft and served 18 months
in federal prison. Identity theft. That's a very
specific area of expertise. It is. And it wasn't
just that. He also had charges for burglary,
grand theft. He was eventually deported back
to Canada. And to try and, you know. wiped the
slate clean, he started changing his name first
to Omar Patron in 2003 and then again to Michael
Patron in 2008. OK, so let's just pause and absorb
this dynamic for a second. You have Gerald Cotton,
the clean cut business school grad with a secret
past as an online scammer. Right. And you have
Michael Patron, the convicted identity thief
and ex -con. And these are the two guys who team
up to start what is essentially an unregulated
bank. It was a perfect symbiotic relationship
for a criminal enterprise. Patron had the criminal
record, the heat. He couldn't be the public face
of the company because a five second Google search
would pull up his mugshot. But he knew the underworld.
He had the street smarts and Cotton had the sterling
reputation, the public face. He could put on
a suit. He could go to the Bitcoin conferences,
talk to journalists, smile and seem completely
plausible. Cotton was the front man. Petrie was
the architect in the shadows. In the early days,
absolutely. They founded QuadrigayCX in late
2013, and they made a big splash early on. They
installed the second ever Bitcoin ATM in Canada
in a coffee shop in Vancouver. I remember that
time, 2013, 2014. That was a huge deal. It made
crypto feel real, you know, tangible, not just
some weird internet money. And that's exactly
what they were selling, an image of legitimacy,
an image of infrastructure and stability. But
even back then, if you were paying close attention.
the cracks were already starting to show. You're
talking about that interview he did. That 2014
interview, yeah. He's talking about security
and he casually mentions that they store all
their customer funds on paper wallets in a safety
deposit box at a bank. Which, for anyone listening,
is literally a piece of paper with the private
keys printed on it. Right. And for you or me
holding a bit of crypto, that's actually a pretty
secure method. But for a financial exchange handling
millions of dollars in daily volume, it is absurdly,
dangerously inefficient. It's like a stock exchange
saying they keep all their share certificates
in a shoebox under the CEO's debt. Exactly. And
Cotton even said something like, we just send
money to them. We don't need to go back to the
bank every time, which implies this one -way
flow. Money goes into the box, but getting it
out is a slow, manual process. It was a huge
red flag about their liquidity. But this partnership
didn't last forever. Patron eventually leaves.
He does. By 2016, there's a major shift. Quadriga
had tried to go public on the Canadian Securities
Exchange, which would have meant opening their
books for a real audit. And they failed. The
deal fell through. They ran out of money. And
right around that same time, all the other directors,
including Mogul Patron, resigned. Leaving Jerry
Cotton as the sole director. The sole director.
The sole officer. the sole shareholder, the only
person with the keys to the entire kingdom. From
2016 onward, Quadrig SCX was a one -man show.
Which brings us to part two, the operation. And
really, it should be called the illusion, because
the entire company... was a facade. It was pure
theater. If you logged onto their website, it
looked professional. You saw, you know, live
price charts, trading volume, order books. You
pictured a bustling office, a server room, maybe
a compliance department down the hall. But the
reality was just Jerry Cotton sitting on a couch
in his house in Fall River, Nova Scotia, with
an encrypted laptop. That was it. There was no
office. There were no real employees, just a
handful of remote contractors who handled customer
support. And the most damning part of all. There
was absolutely no accounting system. Wait, wait.
Say that again. No accounting system. Yeah. You
don't mean like they had bad accounting. You
mean literally none. Yeah. No QuickBooks. Not
even an Excel spreadsheet. Nothing. Zero. When
the court -appointed monitor, Ernst & Young,
came in later, they were completely baffled.
There were no corporate books, no general ledger,
no record of profits and losses. He was running
a quarter billion dollar financial institution
like a kid's lemonade stand. That is... That's
just terrifying. But their biggest operational
problem wasn't even the accounting. It was the
banking, right? Yeah. And this is such a critical
piece of the puzzle. It's central to the whole
story. Because back then, the big Canadian banks,
RBC, TD, Scotiabank, they hated crypto. They
saw it as a massive risk for money laundering.
And they just refused to deal with it. So if
you're an exchange like Quadriga, you can't just
walk into a BMO and open a business checking
account. No, they'd shut you down in a week.
Your accounts would be constantly frozen. So
this creates a huge problem. How do you move
millions of real Canadian dollars in and out
of your exchange if no bank will touch you? You
have to find a workaround. You have to go into
the shadows. You end up using these third -party
payment processors. And these are basically intermediary
companies that act as a buffer between the crypto
world and the traditional banking system. But
even the legitimate ones would have standards.
They do. So Cotton had to use the... absolute
bottom of the barrel. Companies with names that
sound fake like WB21 and Crypto Capital. And
these weren't exactly reputable firms. Not even
close. The CEO of WB21 was later sued by the
SEC in the U .S. for $165 million fraud. Crypto
Capital was a Panamanian company that got linked
to the massive Bitfinex hack and was accused
of laundering hundreds of millions for South
American drug cartels. So these are the business
partners Jerry Cotton chose. He was giving customer
money to international criminals. Because they
were the only ones who would do business with
him. And this reliance on shady, unreliable processors
led to some truly bizarre real -world consequences
for customers. You're talking about the Laval
incident. This story is just incredible. It's
like something out of a gangster movie. Because
the electronic wires and bank transfers were
constantly getting frozen or delayed, Quadriga
came up with a solution. They set up a physical
cash pickup point. What? A physical cash pickup.
in an unmarked office in Laval, Quebec. If you
wanted to withdraw, say, $20 ,000, customer support
would literally tell you, go to this address
at this time and a guy will have an envelope
of cash for you. That is unbelievable. Can you
imagine your bank telling you to do that? Yeah,
for your withdrawal, just meet a guy named Vinny
behind the warehouse. It's insane. And customers
would drive for hours to get to this nondescript
building, and sometimes they'd actually get their
money. But just as often, they'd arrive to find
an empty office or a confused receptionist who
had never heard of Quadriga. The cash just wouldn't
be there. That's a five alarm fire of a red flag.
It screams that the company is completely out
of money. And yet, people kept depositing. Why?
Two words. The 2017 boom. Ah, right. The mania.
We have to remember the psychology of that year.
Bitcoin started 2017 at under $1 ,000 and ended
it near $20 ,000. Everybody was a genius. Everybody
was getting rich. And greed makes you blind to
risk. Completely. The sheer volume of new money
pouring in masked all the underlying problems.
Quadriga processed something like 1 .2 billion
Canadian dollars in trades in 2017 alone. In
a Ponzi scheme, as long as new money is coming
in faster than old money is trying to get out,
the illusion of solvency can be maintained. But
then, then came 2018, the crash. The crypto winter.
Bitcoin's price just fell off a cliff. It lost
80 % of its value. And when the price crashes,
what's the first thing everyone wants to do?
Get their money out. Sell. Get back to the safety
of cash. And suddenly that flow of money completely
reverses. Everyone wants out and nobody new is
coming in. The music stops. And the whole house
of cards starts to wobble. It was in a death
spiral for all of 2018. CIBC, one of the big
banks, foes $28 million of their funds because
they looked at the account and couldn't figure
out who the money actually belonged to Quadriga
or its customers. And the withdrawal delays went
from weeks to months. The Reddit forums were
on fire. Is Quadriga insolvent? Has anyone gotten
their money? It was chaos. Cotton was juggling
lawsuits, frozen bank accounts and an online
mob of furious customers. So he's completely
cornered. The walls are closing in. And in the
middle of this total five alarm catastrophe,
he decides to book a trip to India. Ostensibly
for a honeymoon and to help open an orphanage.
Which brings us to part three. The crash and
the death. And this is the timeline that has
launched a thousand conspiracy theories. The
details here are just so, so important. They
really are. So Cotton and his new wife, Jennifer
Robertson, they travel to Jaipur. They check
into the Oberoi Raj Vilas, which is this incredibly
luxurious five -star resort. Okay. On December
8th, 2018, Cotton complains of severe stomach
pain and is admitted to a private hospital. The
Fortis Escorts Hospital. The initial diagnosis
is septic shock, peritonitis, intestinal obstruction.
Now, we should say Cotton did have a documented
history of Crohn's disease. Which is a serious
inflammatory bowel disease, but it's not usually
a death sentence for a 30 -year -old, is it?
No, it's typically manageable. It's rarely fatal,
especially for a young man with access to top
-tier private medical care, unless it's an extremely
acute complication that's been left untreated.
The speed of what happened next is just shocking.
He's admitted on the 8th. And he's dead on the
9th, less than 24 hours later. The official cause
of death is listed as cardiac arrest resulting
from the complications. A death certificate is
issued almost immediately on December 10th. The
local police provide a no objection certificate,
which is needed to transport a body, and he's
embalmed and flown back to Nova Scotia for a
funeral. just a few days later. It all happened
incredibly fast. Now, if you just look at that
in a vacuum, it's a terrible tragedy. A young
man dies from a sudden medical complication while
traveling. But you can't look at it in a vacuum.
You have to look at what he did just before he
left for that trip. 12 days before, to be exact.
November 27th, 2018. Less than two weeks before
he boards that flight to India, Gerald Cotton
sits down with a lawyer and signs his last will
and testament. And this wasn't some simple, you
know, I leave everything to my wife document.
This is a very specific, very detailed plan for
the disbursement of his estate. His $9 .6 million
personal estate, yeah. Everything went to his
wife, Jennifer Robertson. The mansion in Fall
River, another property out in Kelowna, B .C.,
a 2017 Lexus, a sailboat. Even an airplane. He
owned a Cessna. And the dogs. We cannot forget
the dogs. No, you can't. He specifically set
up a $100 ,000 trust fund for the lifelong care
of his two pet chihuahuas. So let me get this
straight. He takes the time to legally secure
the financial future of his dogs. Right. But
the will contains absolutely no mention of the
business. Nothing about the crypto keys, the
passwords, or the quarter of a billion dollars
belonging to his 115 ,000 customers. Not a word.
It looks less like responsible estate planning
and more like an exit strategy. It's a man meticulously
securing his personal assets before something
happens. Okay, so he dies on December 9th. But
here's the part that is just indefensible from
a business perspective. Quadrig ACX, the company,
says nothing. Total silence. For over a month,
they don't announce his death. And worse, they
keep accepting deposits. They keep taking people's
money. All through December and into January,
new customers are sending money to an exchange
whose CEO is dead and whose assets are supposedly
locked forever. It's just, it's criminal. The
public announcement doesn't come until January
14th, 2019. This very sober post on their website
is with a heavy heart that we announced the sudden
passing of our founder. And that's when the crypto
world just exploded. The site immediately went
down for maintenance. And then on January 31st,
the company officially filed for creditor protection.
And this is the moment the Lost Keys narrative
is born. Jennifer Robertson, his widow, files
this sworn affidavit. And it basically says,
Jerry ran everything from his encrypted laptop.
I don't know the password. Nobody knows the password.
All the money is trapped in secure, cold storage
wallets. And we can't get to it. And the media,
as we said, they just ran with it. It was a perfect,
simple, tragic story, the absent -minded genius
and his lost digital treasure. But then the professionals
got involved. Then came Ernst & Young. The court
appointed them as the monitor, the official investigator,
and their job was simple. Find the money, crack
the laptop, find a backup key, search the safety
deposit boxes, whatever it takes. And this leads
us to part four, the unraveling. Because what
Ernst & Young found on the blockchain didn't
just poke holes in the Lost Keys story. It blew
it to smithereens. So EY, with the help of blockchain
forensic experts, they managed to identify the
six main cold wallet addresses that Quadriga
supposedly used to store the vast majority of
customer funds. These are the digital vaults
where that $190 million was supposed to be safely
sitting. That was the claim. So they look up
these addresses on the public blockchain ledger.
And the moment they look inside, zero. Empty.
They were completely empty. Not locked. Yeah.
Not inaccessible. Just empty. And here is the
absolute kill shot to the official story. Forensic
analysis showed that those wallets had been systematically
emptied out and had been sitting empty since
April of 2018. April 2018. That's eight months
before Jerry Cotton died in India. Exactly. So
even if he had walked out of that hospital completely
healthy, even if he had given them the password
on a silver platter, it wouldn't have mattered.
The money was already gone. The death didn't
cause the loss. The death was the event that
revealed a loss that had already happened. Precisely.
The death became the cover story for the theft.
There was this one moment during the investigation
that is just so darkly comical, it perfectly
sums up the chaos and incompetence. The inadvertent
transfer. Ugh, this is just painful to even talk
about. So while EY is conducting its investigation,
some of the remaining Quadriga contractors are
trying to be helpful, trying to consolidate the
few remaining funds they can find. And in the
process, they accidentally trigger some old automated
script that Cotton had set up. And they inadvertently
transfer another 103 Bitcoin worth, about half
a million Canadian dollars at the time, into
one of those now infamous inaccessible cold walls.
You're kidding me. They threw another half a
million dollars into the black hole they were
investigating. Yes. They basically compounded
the loss live in real time. It was like watching
a car crash in slow motion inside another car
crash. It just proved that nobody but Cotton
had any idea how this rickety machine was actually
put together. So the big question then is obvious.
The wallets are empty. Where did all the money
go? Did he stash it somewhere? Is it buried in
the Cayman Islands? And that question takes us
to part five, the verdict. Because the Ontario
Securities Commission, the OSC, conducted its
own massive investigation. They released their
final report in June 2020, and it left no room
for ambiguity. And they had that great line,
an old -fashioned fraud wrapped in modern technology.
A perfect summary, because here's how the fraud
actually worked. And this is where you can see
the DNA of Scepter, his teenage scammer persona,
all over it. So what did he do? First... Cotton
created a series of fake accounts on his own
Quadriga platform. He gave them aliases like
Chris Marquet or Eri2D2 or Cethos. So these were
basically ghost accounts that he controlled.
Exactly. Then he would just go into the back
-end database of the exchange and credit these
accounts with millions of dollars of fictitious
Canadian currency. He would just take one milzen
into the balance field. He was literally printing
his own money. Counterfeiting. He was printing
Quadriga bucks. They weren't backed by anything.
Then, and this is the genius of the scam, he
would take those fake Quadriga bucks and use
them to buy real cryptocurrency from his own
unsuspecting customers on the platform. Oh, wow.
So if I'm a regular user and I sell one Bitcoin,
I think I'm trading with another real person
and I get, say, 10 ,000 real Canadian dollars
in my account. But you're not. You're trading
with Jerry's fake alias and the $10 ,000 that
appears in your account balance is just a number
he typed into a database. But he loves. He now
has your real Bitcoin. And what did he do with
all that real crypto he was siphoning off? He
transferred it off Quadriga immediately. He moved
it to personal accounts he held on other competing
exchanges, places like Poloniex, Kraken, Bitfinex.
Okay, and this is the part that I find so psychologically
interesting. He wasn't just stealing it to buy
yachts and private jets, though he certainly
did that too. He was gambling with it. He was
a degenerate trader. An addict. The OSC's forensic
analysis was incredible. They tracked the flow
of funds and found that he was taking these hundreds
of millions of dollars of stolen customer crypto
and making massive high risk leverage trades
on other platforms. He was betting on the price
of other coins. He was mostly making huge bets
that the price of Bitcoin would go up. He was
going along with leverage. But you have to remember
the timeline. This was happening through 2017
and crucially 2018. When the price was crashing.
When the price was. a free fall so he's betting
big on black and the roulette wheel is coming
up red over and over and over again and like
any gambler in a hole he just digs deeper he
doubles down it's the classic gambler's fallacy
my luck has to turn i just need one big win to
make it all back so he would steal more customer
funds to make even bigger more desperate bets
and he lost it all the osc calculated his trading
losses alone were over a hundred million dollars
so he didn't hide the money he incinerated He
was just a bad trader playing with house money,
except the house was his customer's life savings.
He was both an embezzler and a terrible trader.
He siphoned off millions to fund his lavish lifestyle,
the properties, the travel, the plane. But the
vast bulk of the money was just vaporized in
bad market bets. Which finally explains everything.
It explains why the wallets were empty. It explains
why he had to operate it as a Ponzi scheme. He
needed new customer deposits to pay out withdrawal
requests because the original funds were already
gone. And by December 2018, the hole was just
too deep. The math no longer worked. There was
no way out. He was completely trapped. This reality,
the sort of denial tragedy of a gambling addiction,
it's almost a letdown for the people who wanted
a grand conspiracy. Which, of course, brings
us to the conspiracy theories. Oh, yes. The exit
scam. Because so many people simply refused to
believe he just died of Crohn's disease. And
you can understand why. On the surface, the story
is compelling. You have a cornered fraudster
facing decades in prison. You have a death in
a foreign country where theoretically a fraudulent
death certificate isn't impossible to obtain.
You have a closed casket funeral. And a body
that was embalmed and repatriated with incredible
speed. It all just feels a little too convenient.
It was so suspicious that in December of 2019,
the law firm that was representing the victims
sent a formal request to the RCMP, Canada's federal
police force. They asked for his body to be exhumed.
They wanted to dig him up and do a DNA test.
Yes. They cited the questionable circumstances
surrounding the death and the need to definitively
confirm his identity and cause of death. And
did the RCMP ever do it? No, they didn't. They
reviewed the file and eventually stated that
they didn't find sufficient evidence of foul
play to warrant an exhumation. But that refusal,
of course, just added more fuel to the conspiracy
fire. To this day, there are entire online communities
dedicated to the idea that Gerald Cotton is alive
and well, sipping a drink on a beach somewhere
under a new name. And there have been documentaries
and podcasts like Exit Scam and Netflix's Trust
No One that have really explored that theory
in depth. I have to ask you, just based on all
the evidence, what's your take? Is he alive?
You know, I think it's tempting to believe the
more exciting story, but looking at the facts...
Krohn's complications are very real. Septic shock
can kill a healthy young person incredibly quickly.
And on a psychological level, this is a guy who
lived his entire life online. He was addicted
to the game, to the trading, to the deception.
Is it really plausible that a person like that
could just unplug forever? Never log in again,
never make another trade. It seems unlikely to
me. And there's the other point, right? If you
were going to fake your death and run, why would
you leave the wallets empty? Wouldn't you have
$100 million stashed away in Monero somewhere
first? Exactly. If it was a planned exit scam,
it was the worst planned exit scam in history.
He left his wife behind to face the fallout with
essentially no hidden assets to draw on. That
speaks more to a desperate sudden end rather
than a meticulous master plan. Speaking of his
wife, let's move to the aftermath. Part six,
the human cost of all this. Jennifer Robertson.
She has always, always maintained that she knew
nothing about the fraud. Her story is that she
genuinely believed Jerry was this brilliant,
hardworking CEO, and she was just the supportive
partner. She even wrote a book about it called
Bitcoin Widow. In it, she paints herself as just
another one of his victims. But the courts didn't
entirely see it that way. The money she was living
on, the houses, the plane, the travel, it was
all proceeds of crime. So she had to give it
back. She did. As part of a settlement with the
bankruptcy trustee, she agreed to forfeit about
$12 million worth of assets. Pretty much everything
was clawed back to go into the pot for the victims.
She was allowed to keep some personal items,
her retirement savings, and about $90 ,000 in
cash. But the life of luxury was over. And what
about the actual victims, the 115 ,000 people
who lost everything? It has been a long, slow,
painful grind through the bankruptcy courts.
These things take years. It wasn't until 2023,
more than four years after the collapse, that
the trustee was able to make the first interim
payout to creditors. And the number is just heartbreaking.
How much did they get back? About 13 cents on
the dollar. 13 cents. So if you had $100 ,000,
your life savings, your retirement in Quadriga,
you got back. $13 ,000. Four years later. And
that's just the financial loss. You can't put
a number on the stress, the sleepless nights,
the retirements ruined, the families put under
strain. The human cost is immeasurable. It really
brings us back to the central crushing irony
of this whole affair. Bitcoin was invented to
create a trustless financial system. The whole
idea was don't trust the bankers, trust the math.
And yet Quadriga collapsed because of a massive
old fashioned failure of trust. It exposes what
you could call the centralization paradox of
crypto. The currency itself is decentralized,
but for most people to actually buy it and sell
it, they flock to these centralized exchanges.
They ended up swapping the big regulated insured
banks for... A guy named Jerry with an encrypted
laptop and zero oversight. We traded regulated
institutions for unregulated individuals. And
it turns out individuals can be much more easily
corrupted. Or they can just die. And this event,
this disaster, it was a brutal wake up call for
Canadian regulators. The OSC, the government,
they realized they couldn't just pretend crypto
didn't exist anymore. So Quadriga's collapse
basically forced the industry in Canada to professionalize.
In a painful way. Yes. Now, to operate a crypto
exchange in Canada, you have to register with
the regulators. You have to have third party
custody of assets. You have to prove you have
reserves. You can't trade against your own customers.
It was the Titanic of Canadian crypto, the spectacular
disaster that forced everyone to start building
lifeboats. So as we wrap this up, I want to leave
our listeners with one final provocative. We
know the wallets were empty by April 2018. He
died in December. For eight long months, he was
running on fumes, just juggling deposits and
withdrawals, robbing Peter to pay Paul. The Ponzi
was mathematically at its end. The music had
stopped, even if no one on the outside could
hear the silence yet. So here's the question.
Was Gerald Cotton's death the cause of the collapse?
Or was it just the event that finally revealed
a collapse that was already complete? If he hadn't
gotten on that plane to India, what would the
next week, the next month have looked like for
him? He would have landed back in Canada and
walked straight into an inferno. The lawsuits,
the frozen accounts, the OSC investigation was
already closing in. The collapse was 100 % inevitable.
So his death, whether it was a faked exit or
a tragic natural event or something in between.
It wasn't the iceberg that sank the ship. No.
The ship was already at the bottom of the ocean.
His death was just the flare that finally lit
up the wreckage for everyone to see. A sobering
thought. And maybe the ultimate lesson from all
this is that even in a world of trustless technology,
you still have to decide who to trust. And if
the answer is just one guy with a laptop, you
might want to reconsider. Trust, but verify.
And maybe, just maybe, don't give your money
to a guy whose teenage nickname was Scepter.
Good advice. That's our deep dive on the rise
and fall of Quadrigacex. Thanks for joining us.
Thank you.