Unchained and Unconfirmed (Later, Unconfirmed and Unchained were merged into a single Unchained) are podcasts created by a journalist named Ms.Laura Shin, and feature interviews with prominent figures in the cryptocurrency world; Unchained began on the Forbes website in June 2016.Unconfirmed is a newer, shorter podcast that is released weekly. Unchained is about an hour long and Unconfirmed is about 30 minutes long.
Well, the February 8th installment of Unconfirmed is an interview with Ms.Taylor Monahan of MyCryptoWallet. Recently, there was a story about "Canadian cryptocurrency exchange QuadrigaCX's founder, the sole password holder, died, and $150 Million worth of assets could not be withdrawn", and I checked the address of QuadrigaCX to see if it was true or not. In conclusion, it seems that "there is a high possibility that the wallet containing US$150 Million worth of cryptocurrency does not exist either cold or hot.
To summarize the content of the interview,
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CEO Mr.Gerald Cotton, who is believed to be dead, made a will two weeks before his death, stating that he would leave his wife US$100,000 (!) to take care of his real estate, airplane, two pet Chihuahuas to his wife. It's strange that he prepared that much and didn't arrange how he would leave his private keys to someone after his death.
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India is also known to have a "business" of issuing fake death certificates when CEOs die (and the cause of death, Crohn's disease, is a serious disease that interferes with many aspects of daily life, but few people die. The death rate is around 1%.)
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Analyzed the transfer of funds for three addresses that QuadrigaCX has previously announced as being their addresses.
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QuadrigaCX seems to be using only these three accounts. This is very strange, normally an exchange the size of QuadrigaCX would have hundreds or thousands of addresses.
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Similarly, cryptocurrency transfers between addresses owned by exchanges of the same size are often automated, However, QuadrigaCX is likely to be moving cryptocurrencies manually, because the amount moved is only a nice round number, such as 200 ETH.
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Cold storage shows a characteristic pattern of fund transfers, with about 10-30 large deposits and no withdrawals, but none of the three QuadrigaCX addresses, or the addresses from which deposits and withdrawals were made, do so.
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A significant amount of Ethereum has recently been transferred from QuadrigaCX addresses to three exchanges: Shapeshift, Bitfinex, and Poloniex.
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The transfer of funds between exchanges is sometimes used by exchanges that do not have the ability to deposit legal tender to convert cryptocurrency into legal tender on other exchanges to fund daily operations.
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However, the amount of ETH being transferred from QuadrigaCX is too large to be considered day-to-day operating funds.
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Specifically, 218,000 ETH was moved to Poloniex, which at that time had US$7.7 million worth of funds in its Poloniex account, and 320,000 ETH was moved to Shapeshift, which had US$20 million in its account (these two alone accounted for nearly 15% of the funds allegedly missing).
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Transferring funds to Shapeshift is particularly strange. This is because while Shapeshift is fast, the fees are high, and if you trade such a large amount, the fees alone can be substantial.
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One concern is that accounts such as Shapeshift may have been created fraudulently using KYC(Know Your Customer) information of QuadrigaCX users.
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KYC is "Know Your Customer," a rule in financial law that requires personal verification at the time of account opening to prevent money laundering.
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Usually, they will ask you to send them your passport or other official proof of personal identity and a selfie with it for verification.
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QuadrigaCX, the KYC provider, can easily open fake accounts on other exchanges by using KYC information sent by its own users.
So, in summary, "The CEO has fled. The money is probably being drained into accounts on other exchanges (probably opened by misusing personal information).
If the KYC information is misused by the exchanges that do KYC, there is nothing we can do.
Bitfury, which originally became famous for mining and later for providing blockchain-related services, says that it "monitors cryptocurrency addresses on a long-term basis" and will be able to immediately detect any drastic changes in Quadriga-related addresses. So, Bitfury is doing more than just mining..
In any case, it was one more lesson that we need to protect our own cryptocurrency.