Yesterday, Gizmodo reported Crypto Exchange Says It Can’t Repay $190 Million to Clients After Founder Dies With Only Password.
Canadian crypto exchange QuadrigaCX says it cannot repay most of $190 million in client holdings after its 30-year-old founder Gerald Cotten, the only person who knew the passwords to its “cold storage,” unexpectedly died in India in December 2018, Coindesk reported on Friday.
In a sworn affidavit with the Nova Scotia Supreme Court, widow Jennifer Robertson said that QuadrigaCX owes its customers some $190 million in both cryptocurrency and fiat money. QuadrigaCX has filed for creditor protection because it says it cannot access the funds stored in “cold storage,” just the comparatively smaller amount in a “hot wallet” used for transfers, CoinDesk wrote:
The exchange holds roughly 26,500 bitcoin ($92.3 million USD), 11,000 bitcoin cash ($1.3 million), 11,000 bitcoin cash SV ($707,000), 35,000 bitcoin gold ($352,000), nearly 200,000 litecoin ($6.5 million) and about 430,000 ether ($46 million), totaling $147 million, according to the affidavit.
QuadrigaCX Never Held $100M In Bitcoin, Says Crypto Researcher
Today, BTC News reports QuadrigaCX Never Held $100M In Bitcoin, Says Crypto Researcher
Surprise! The craziest crypto-related story of 2019 has just become a tad zanier. According to a research piece from a leading industry researcher, QuadrigaCX, a Canadian Bitcoin (BTC) exchange in the midst of a multi-month imbroglio, could have been fibbing about its cryptocurrency holdings — and by a large sum at that.
For those who missed the memo, QuadrigaCX, once Canada’s largest and most popular BTC-focused exchanges, has long been under pressure. As reported by NewsBTC last year, the Canadian Imperial Bank of Commerce (CIBC) froze five accounts that were linked to Costodian Inc., Quadriga’s payment processor, and Jose Reyes, its owner. It was reported that $28 million was frozen, leaving hundreds of the platform’s customers stranded, and strapped for funds.
Crypto Medication, a researcher and data analyzer responsible for a number of key exposés, recently took to Zerononcense, a crypto-centric publication he heads, to divulge his analysis of this debacle.
Long story short, through the use of in-depth blockchain analysis, Medication determined that QuadrigaCX never lost access to its Bitcoin holdings, along with the fact that that the BTC sum cited in the affidavit likely isn’t accurate. No conclusive figures could be pinned, but the researcher also divulged that Quadriga enlisted the use of fractional reserves to service its customers, using client deposits to issue withdrawals.
Crypto Medication
https://twitter.com/ProofofResearch/status/1092114817341632513
The fraud and scams continue.
Also see my Mindless Crypto Action report yesterday in which Empower Coin blasted from a value of $500 to $619 million back down to $500 in a matter of a few days.
Mike “Mish” Shedlock
Most of these online crypto exchanges are places where money laundering and god know what else go on. They are really no different then the online exchanges that were shut down years ago for similar activities including funding terrorism and child trafficking.
I want to go deeper into this topic and talk about where I keep my money. Go to the site https://wlxwallet.com/gbp-wallet to store, buy, sell and exchange your pounds, because it is one of the most popular currencies in the world.
can the depositors (unsecured creditors) be indemnified via a “bail in” ?
yes, depending on the country and sudden rule changes
What is Fractional Reserve Lending other than a Central Bank sponsored Ponzi Scheme?
The only real difference is that central banks can always print money to make up for losses.
It is nothing like a Ponzi scheme. In a Ponzi scheme, investors are paid returns using new deposits from investors, while the main investment pool is stolen. The whole transaction is hidden, so that no one can tell what is going on. It inherently will implode sooner or later. It can never be unwound, with investors getting repaid.
In fractional lending, nothing is stolen. Money is not diverted to give to investors from new investment. Nothing is hidden. Everything is on the books. The only thing that happens is that if a bank has $1m in equity, they can loan out $10m. This does not usually implode, and almost always it can be unwound. There are only two risks. One is that a bank issues too many loans to people who don’t pay it back. The other is a run on the bank, where people who have deposited the money all demand their deposits back.
In the absence of fractional reserve lending, it would be a much, much different world. Banks would need to cover their costs from lending their equity out one time, and they would have no use for your deposits, as they couldn’t loan them out, they could only loan out their equity, so:
By being able to lend out money that you deposit with the, banks actually want your deposits, and are willing to pay you for them, either with interest, or free services. Because they can make far more loans than their own equity, they have to charge much less per loan, since they have to cover less costs with each loan.
Theft by debasement is no different than theft by any other means.
I do 1 days worth of work for you, in return for a written promise that you will do one for me later. I then hand that promise to Mish for safekeeping. He then copies it up 10 times, handing the copies out to his friends. Each of whom can now come to you with a claim that you need to work a day for them….
Money/purchasing power isn’t stuff. It’s just claims on stuff. As such, it really is a zero sum game: The only thing of importance, is the relative share of the total number of claims one owns. You getting an extra dollar, makes everyone else a bit poorer: The total amount of real value stays the same, while you now have claims to a bit more of it. Hence, by simple arithmetic, someone else must now have claim to a bit less.
If fractional reserving involved real value instead of simple claims on it, things would be fine. You deposit a car in a bank, and magically the bank now have 10 more cars to hand out…. Then, yes, the guy with the original car that he worked for, wouldn’t be shortchanged by everyone else also getting one. But things aren”t nearly as sanguine when all the bank suddenly can print up 10 of, is more claims on what remains still just the same one car. You worked for it, someone else were handed an equal claim on it, in exchange for nothing more than privileged access to a privileged twit in a privileged institution called a bank.
This has exactly nothing to do with any feature nor quality of neither Bitcoin, nor any other currency, crypto or not.
It’s just a bunch of dupes handing something over to some dude, who then either loses it or steals it. Nothing more, noting less.
Ensuring people remain dumber than dirt dupes, stupid enough to believe wealth creation has anything at all to do with things “going up and down,” is central to the fictional narrative which underpins the nonsense that banks and banksters are some sort of important actors. Rather than just simpletons performing routine utility tasks any halfwit could do just as well.
Which then justifies those clowns getting wealthy from nothing more than straight up welfare payments, handed to them in exchange for nothing, never earned, in the form of loot stolen from the rest, by the Fed, Government and what the dupes have been told is the almighty “The Law.”
The sheer success of this “enduping” of the idiot army, is what this story is about. Not anything to do with currencies.
In this regard, Bitcoin is much like a pile of unmarked currency. If you don’t have it in your possession, it’s not exactly safe.
Klepto-currency.
Nice. That raised a laugh!
Just like Bernie Sanders story just Bernie was with fiat. Should we call dollars rip cash?
Bitcoin is a ripoff not because of scams, banks and fiat has had it shares of lying or scams and will still have more in the futures.
Fractional reserve is being used incorrectly here. The phrase they’re looking for is Ponzi Scheme. You can’t just create bitcoins by writing a check. Looks like the guy stole his customers money and faked his own death. That’s what we call a learning experience.
The wonders of the computer age! Crooks can now run Ponzi schemes over Gigabit-linked networks. But I do object to the false advertising. Bit Coin should more properly be labelled Rip Coin for the unwary newcomer.