Coinbase CEO Brian Armstrong: QuadrigaCX Probably Mismanaged, Not Exit Scam
In his first tweet, Armstrong explains that “we did our own internal research, including some blockchain analytics, to see if we could help,” but qualified that his take could be classified as “*pure speculation*” — most likely to preemptively quell the idea that he and his team solved the mystery surrounding the exchange.
Last month, after the untimely death of its CEO, Gerald Cotten, it was revealed that QuadrigaCX owed creditors about $190 million, and the sole holder of the exchange’s private keys controlling its cold storage was Cotten, leaving the funds inaccessible. Users of the exchange, which has since closed, are pursuing legal action to recover their funds.
Outlining his theory, Armstrong notes:
“QCX was one of the oldest exchanges in existence (founded in 2013). If they planned an exit scam, it likely would have been timed better.”
This is a fair point. If they were planning to abscond with the funds they controlled, this would be an odd time to do it, still in the thick of the bear market. Furthermore, since the exchange is over five years old, it was clearly not devised to be an exit scam from the beginning.
Armstrong goes on to support what recent reports have alleged — that Quadriga’s funds were mismanaged, and the information coming from its representatives does not seem to align with analysis of the blockchain.
Armstrong suggests that after a multimillion bug in June 2017, the exchange began sending funds to cold storage. He continues:
“Patterns of sends from cold storage suggest they tried keeping exchange afloat, and maybe attempted to trade their way out of a hole; (again just a guess here) … Liquidity dried out and bear market of 2018 may have caught up with them; … Sequence of events suggests this was a mismanagement with later attempt to cover for it … This implies that at least few people inside Quadriga [sic] knew that they were running fractional. If so, then it’s possible that untimely death of their CEO was used as an outlet to let the company sink.”
Armstrong’s theory, then, paints Cotten’s death as a sort of convenient excuse to let an already failing company finally hit rock bottom. While this theory does little to assuage the fears of Quadriga’s users that they will never get their funds back, it does suggest the exchange’s downfall was the result of mismanagement, and not a nefarious scheme.