While that would be worrisome enough, users’ concerns were compounded by the company’s announcement Monday that its CEO and founder, Gerald Cotten, had died more than a month earlier.
In a statement attributed to Jennifer Robertson, Cotten’s wife, the exchange said he died on December 9 from complications arising from Crohn’s disease while traveling in India. The same statement also said QuadrigaCX was working through a backlog of withdrawal requests and had set daily withdrawal limits.
Then, on Tuesday, QuadrigaCX sent its customers an email, a copy of which CoinDesk obtained, stating that it was processing withdrawals “slowly” and that the team is “actively working on having the funds deposited and distributed.”
“While we don’t have a specific update pertaining to this situation, our goal was to resolve this issue within the next two weeks and we remain committed to that goal,” says the email, which was signed by Aaron Matthews, QuadrigaCX’s interim president and CEO.
QuadrigaCX user and Canadian resident Xitong Zou told CoinDesk that he had filed multiple support tickets in recent weeks and received a response saying the withdrawal could take a week or two each time. “If only the [QuadrigaCX] customer support were better I think it could go a long way, and it’s not like they aren’t active,” he said.
“I see them on Reddit and Facebook and Twitter answering minor questions about cash pickup times etc., but they don’t answer any of the big questions we have regarding the CEO’s recent death,” he wrote in an email, adding:
“The fact that it happened a month ago, and they just announced it now, and no proof of death, no obituary, no linkedin profiles of any of the staff, no physical addresses, limited crypto withdrawal limits, etc all makes people suspicious.”
As a result, “there’s a bunch of warning bells going off in most people’s heads right now,” Zou said.
QuadrigaCX did not respond to multiple requests for comment.
When contacted by CoinDesk, a spokesperson for Global Affairs Canada, the government agency that manages diplomatic relations, appeared to confirm QuadrigaCX’s account of Cotten’s death overseas, but did not mention his name or give a date.
“Our thoughts and sympathies are with the loved ones of a Canadian who recently died while visiting India,” said the spokesperson, Sylvain Leclerc. “We are providing assistance to the family at this very difficult time.”
Leclerc said he could not disclose any further information, citing Canadian privacy law, and did not answer follow-up questions by press time.
When reached by phone, a spokesperson for the Indian Bureau of Immigration was unable to confirm that Cotten had been in the country.
QuadrigaCX blamed the withdrawal backlog on its recently resolved court dispute with the Canadian Imperial Bank of Commerce (CIBC), which froze funds held by the exchange’s payment processor, Costodian, Inc., over concerns about their origin.
While the Ontario Superior Court of Justice briefly took custody of these funds last year, Judge Glenn Hainey released the majority of them back – $70,000 in U.S. dollars and $25 million in Canadian dollars (about $19 million USD), less $200,000 that was withheld, according to a court document published in December.
These funds were then frozen by the processor’s new bank, the Bank of Montreal, according to a statement by the exchange on Reddit.
A subsequent update stated that the bank had released the funds, but said there would be another delay while Billerfy, a payment processor, endorsed the bank drafts.
When reached by CoinDesk, Billerfly managing director and owner José Reyes said the company had finished endorsing the drafts “but no banks have the appetite to take the drafts so we are looking around for crypto-friendly banks that will take the drafts so we can use it to payout clients. Even lawyers are having a hard time getting a bank.”
When asked if that meant customer withdrawals would remain delayed until a banking partner could be found, Reyes responded:
“Yes. Hope not long. We are really working very hard to work with crypto-friendly banks.”
Billerfy and Costodian are both owned by Reyes, and were all listed as parties in the now-concluded legal fight.
A number of QuadrigaCX customers have been complaining about withdrawal issues on social media platforms like Reddit and Twitter, with most claiming long delays – some several weeks or even months long – in receiving funds.
Some withdrawal attempts were met with a “failed to send” message, a problem that interim president Matthews addressed in his Tuesday email to customers.
“Regarding failed withdrawal notice to customers,
Your pending withdrawal has not failed, it was canceled back to your account. Please restart your withdrawal according to the new limits set out by QuadrigaCX on January 14, 2019.”
He later added that all withdrawals “will occur in the advertised timeframes” of two weeks.
Once the exchange has caught up on its backlog, QuadrigaCX hopes it “will return to normal operating levels regarding withdrawals and punctual timelines,” Matthews wrote.
As part of this process, the exchange has instituted new withdrawal limits on U.S. dollars, Canadian dollars and cryptocurrencies, with different limits for differing levels of customer verification.
“We did this to ensure service levels don’t get to the point where any backlogs or interruptions to banking services happen again,” Matthews explained.
The exchange will also work to diversify the number of Canadian banks it works with, so as to ensure no single bank can freeze funds like CIBC again.
Unverified customers can withdraw between $5,000 and $10,000 in crypto, while “level 1 verified” customers can withdraw as much as $25,000, Matthews noted, concluding:
“These changes were the result of our efforts to continuously improve our service offering. We will continue to review service levels and make any changes that we feel best serve the interests of our customers. We thank you for your patience and look forward to the resolution of this matter.”
Anna Baydakova contributed reporting.
Frozen bitcoin image via Shutterstock