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OVERNIGHT CRYPTO MOVERS
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CRYPTO STORY OF THE DAY
In A Bombshell Report Released On Wednesday, Ernst & Young, Trustee For Bankrupt Crypto Exchange Quadriga CX, Detailed Instances Of Massive Fraud At The Exchange, Essentially For Its Entire History - The Report Is Damning Of The Platform And CEO Gerald Cotten's Operations - Cotten Has Since Deceased But The Report Went So Far As To Even Question The Validity Of That Assertion - The Fallout Has Implications For Operators, Consumers But Especially Regulators
The 70-page report details exchange operations as fraudulent to the core. Cotten frequently moved customer funds off his platform on to others and used the funds to trade on margin. He further sold customer crypto to furnish his lifestyle which included real estate and luxury travel purchases. In addition, Cotten would frequently credit fake accounts on his own exchange falsely with fiat balances which allowed him to 'purchase' customer crypto. In total, the report estimates Cotten embezzled somewhere in the range of $200M of customer assets. The document goes so far as to imply that reports of Cotten's death should be questioned.
Takeaway: The report paints a picture of a platform that was likely a fraud by design. The question to be answered now is whether Cotten did actually die as reported or whether that was an additional element of his elaborate ruse. The episode has particular implications for regulators. Quadriga was actually a registered Money Service Business until late 2016 and Cotten frequently referenced that point in interviews etc... Furthermore, he frequently noted that he had approached regulators but they had been unwilling to oversee his operations. As regulators elect to take more control over crypto exchanges Quadriga is an example that demonstrates that checks and balances ensuring platforms are abiding by rules are as important as the rules themselves.
FRNT Financial is an Institutional Brokerage which offers clients a variety of products along with research & analytics in the crypto-space. The company also offers a platform for licensing OTC-trading services. www.frnt.io