Where did the Funds go? A Detailed Breakdown - QuadrigaCX Report (2024)

When Quadriga filed for creditor protection on February 5, 2019, it owed its clients assets worth collectively $215 million. The Monitor only recovered or identified $46 million of assets, leaving a $169 million shortfall.

$46 million

1. Assets recovered or identified by the monitor/trustee

As of June 2019, Ernst & Young had recovered or identified $34 million of Quadriga’s assets, consisting primarily of the funds that CIBC froze in January 2018 and released after Cotten’s death ($25 million), bank drafts that a contractor of Quadriga had in his custody but had been unable to deposit for some time ($6 million), and funds in the possession of payment processors ($600,000). In addition, Ernst & Young recovered assets from Robertson that it expects to be worth $12 million, for a total of $46 million. We did not identify any other assets beyond those identified by Ernst & Young.

$115 million

2. Trading losses sustained by Cotten on the Quadriga platform

As described previously, Cotten created and traded fake assets with clients of the platform under aliases. Cotten sustained trading losses of approximately $115 million and used Quadriga clients’ assets to cover those losses.

$28 million

3. Trading losses sustained by Cotten on external platforms

As described previously, Cotten sustained losses of approximately $28 million trading client assets on three external trading platforms.

$2 million

4. Client funds misappropriated by Cotten for living and travel expenses

Between May 2016 and January 2018, Cotten transferred approximately $24 million of client funds to his and Robertson’s personal accounts, and to real estate lawyers to buy personal properties. From that amount, Cotten returned $10 million to Quadriga in 2018 when he was unable to fulfill withdrawal requests. Robertson returned assets expected to be worth $12 million to the Trustee under an October 2019 settlement, leaving $2 million that was used for living and travel expenses. Other transfers could have been made during the period between May 2016 and January 2018 and transfers could have been made prior to May 2016, but we were not able to determine this due to limited documentation.

$1 million

5. Estimated operating losses

Over the life of the platform, Quadriga generated an estimated $45 million in revenue. Our estimate of operating expenses/losses is based on the following known expenses reflected in the limited documentation available.

$23 million

6. Other

Due to the absence of accounting ledgers and records, and limited records available from third-party sources, we were unable to identify all expenses or losses incurred by Quadriga. However, additional expenses or losses that are likely significant include the following:

1 – Trading losses sustained on external platforms

Cotten may have incurred trading losses in addition to the losses identified in note 3 when trading on external platforms; we are aware that Cotten likely transacted on at least two other external platforms; however, the information to quantify any additional losses is either incomplete or was not provided to us.

2 – Other fees paid to external platforms

Cotten likely traded on other external platforms, and he may have incurred fees not included in note 5.

3 – Other fees paid to third party payment processors

Given the limited available records, we were only able to quantify fees relating to two third party payment processors; however, we are aware that hundreds of millions of dollars moved through other payment processors. This likely would have caused Quadriga to incur additional fees, possibly in the range of millions of dollars (assuming a conservative fee rate of 1%).

4 – Other operating expenses not considered in note 5

As of 2016, Quadriga was not properly recording expenses. Given the nature of the business, it is likely that other operating expenses were incurred that we could not identify.

5 – Additional client assets transferred by Cotten for personal use

As discussed in note 4, Cotten may have misappropriated additional client assets; however, we could not determine whether or not this occurred.