“Bitcoin will not survive.”
“Bitcoin is going nowhere.”
“Bitcoin is a fraud.”
These are the past words of Jamie Dimon, CEO of JPMorgan Chase, an American multinational investment bank and financial services company.
Fast forward to today, he is pushing his company into the crypto space to launch their own branded bitcoin, JPM Coin. JPMorgan is the first major American bank to do so, endorsing the company’s belief in blockchain technology while Jamie Dimon sings a different tune.
So is crypto really a scam, a fraud?
Institutional acceptance and adoption of the technology by JPMorgan Chase should help curb negative sentiments but it’s difficult, especially when you hear news like the story about QuadrigaCX.
QuadrigaCX is a Canadian crypto exchange that’s been making headlines in the crypto world with the unexpected death of their CEO, Gerald Cotten. He passed away On December 8, 2018 in Jaipur, India from complications related to Crohn’s disease. Gerald Cotten was in India setting up an orphanage. He allegedly died holding the passwords and private keys to $190 million worth of cryptocurrency. The exchange owes roughly $250 million in both crypto and in dollars to its 115,000 users.
How bizarre.
The exchange claims they cannot access funds to pay their users or conduct day-to-day operations because these coins are stored in “cold storage”, which are offline accounts that are used to protect these wallets from being hacked. These wallets are protected with a set of encrypted passwords and passphrases, all which allegedly went down with Mr. Cotten.
The exchange has now been granted bankruptcy protection on February 5 for 30 days with the court-appointed Ernst & Young as monitors to help the exchange locate any funds it could use to reimburse users.
Circumstances surrounding the CEO’s death have led to theories and rumours that he faked his death. Some even feel that the entire situation is an exit scam.
Below are several reasons that are fueling this theory:
- Cotten’s will was signed on November 27, less than two weeks before his death on December 9.
- The area in India where Mr. Cotton died is notorious for fraudulent paperwork and it’s possible he could have purchased a fake death certificate.
- His surname on the death certificate has been misspelled. Death certificate shows Cottan; the real surname is Cotten.
- The company had transaction delays and legal disputes leading to millions of dollars being frozen before his death.
- Publicly known addresses belonging to QuadrigaCX’s wallets shows no evidence to support that these were used as cold wallets.
How bizarre.
Furthering these suspicions are recent revelations that the exchange “inadvertently” transferred Bitcoins valued at $460,000 into so-called cold wallets that are beyond the reach of the company.
No more drama. Please.
There is enough to this story to make a Netflix documentary movie and this is only just the beginning.
So is crypto really a scam, a fraud?
News like this in the Canadian cryptocurrency space is disappointing and bad for the overall market. It shakes confidence in an emerging industry and doesn’t help change public perception. People are still afraid of crypto.
Is crypto the problem or are the people behind it and the lack of regulation in this industry the real issue?
When an industry is in its early stages, it makes sense for it to not be regulated in order to allow innovators the room to build and grow their ideas. The events of QuadrigaCX will hopefully serve as notice to the government and major players in the crypto space. Now is the time to start the dialogue on the regulation of cryptocurrency exchanges. Regulation helps legit businesses grow and protects the rights of consumers. After the events of QuadrigaCX, the need for a regulatory system to be implemented is quite apparent. Let this be the one positive to come out of this whole debacle. This has been one expensive lesson.
And No, crypto is not a scam.
Disclosure: The author of this post is one of the 115,000 creditors and owns a bit of crypto in the exchange. Not enough to change a life, but enough to gain an understanding of what they are doing.