Skip to main content

The Ghost of the Quadriga-CX Crypto-Scam

Newsweek

I was looking for yet another exciting topic to write about. It turns out that I might as well deal with yet another reason why I'm not entering into the creepy world of cryptocurrency. Now, a new documentary on Netflix known as Trust No One: Hunt for the Crypto King features yet another scam. You may have heard of the crypto-queen from Bulgaria, Ruja Ignatova, who's currently in hiding. Right now, Ignatova is just missing. In the case of the Crypto-King, Gerald Cotten, it was reported that he died last December 9, 2018. However, some people assume that he might have faked his death in India, which for some, didn't make sense. Even his widow had testified that she was with him when he died. Though, events like the funeral where the coffin wasn't opened for public viewing or other stuff may suggest that he faked his death. The documentary did reveal how a scammer faked suicide and later turned himself in. 

Why did people enter into deals with Quadriga-CX?


A Chinese-Canadian guy named Tong Zou, a victim of the scam appeared in the said documentary. I think it's essential that if you're hit by a fraud--warn others of this person. I remembered being victimized by a scam by a family friend. It was a lot of money which was never recovered. I've known others who lost millions and never recovered. Tong Zou had claimed he foolishly placed his life savings into the transaction hoping it'd grow big. Some people made that mistake with stocks only to find out that stocks don't easily grow either. Stock markets aren't a get-rich-quick scheme. However, Quadriga's cryptocurrency was pretty much it. As Tong said, "I was greedy." He shared his story so it doesn't happen to other people. His losing CSD 500,000.00 is no joke. This is a very brave move especially if you've been hit. 

If there was any reason why I nearly entered a pyramid scheme and got scammed by bad credit by a family friend--I dare to say it was greed. People are into the crypto-craze because of how fast it skyrocketed compared to stocks. Monitoring the stock market daily can be a chore. Let's say that you bought some Jollibee stocks when prices were low due to factors like low demand and surplus. The prices of Jollibee stocks don't easily go up or go down. Instead, stocks can have a steady decline or steady increase except in cases like a crash caused by a political or economic outlook. In this case, the price of the cryptocurrency by Quadriga-X started to skyrocket. People bought them in hopes of becoming wealthy fast. But like nay get-rich-quick scheme--the money that's easily gained is easily gone. Nobody got rich with stocks overnight. Nobody got rich with managed funds overnight either. In fact, any good fund manager will say, "Let's just wait for an increase." Any good self-trader of stocks will know when to hold and when to sell.

Shady details regarding Cotten's and his company Quadriga-CX

Some details regarding Mr. Cotten would rather be frightening according to the Independent which really was also mentioned in the same documentary:
As detailed in recent documentaries like the CBC’s Dead Man’s Switch: a crypto mystery (2021) and Netflix’s Trust No One: The Hunt for the Crypto King (2022), Cotten had been defrauding investors and lying to his family for years, in what the Ontario Securities Commission would eventually declare a Ponzi scheme.

Tong Zou, 33, lost his life savings on Quadriga, including a $200,000 gift from his parents, as he describes in the Netflix film.

"I want to share my story so it doesn’t happen to other people," he told Sky News in March.

In addition to siphoning off nearly $20m in funds for personal use, Cotten also lost more than $90m of Quadriga customers’ cash making fraudulent trades on and off the exchange, sometimes using accounts with Star Wars-inspired spoof screen names like “Aretwo Deetwo” and “Seethree Peaohh.”

The company didn’t even have an official bank account, processing payments through third parties or Cotten’s own laptop. The Cottens’ home was filled with piles and piles of loose cash, which Gerry claimed was a consequence of supposedly discriminatory banks who didn’t yet understand crypto and refused to work with them. It would also be revealed that the businessman had started scamming people online at age 15, and had ties to Midas Gold, a business linked to a Costa Rican money laundering operation.

Perhaps the central argument for the ascendancy of cryptocurrency is its supposed transparency: every transaction made with bitcoin is logged on a public ledger called the blockchain, though the identity of the trader isn’t always clear. Quadriga tested these principles to the fullest.

Regulators were able to recover about $27m of customer funds, and Robertson turned over almost all of her possessions in a bankruptcy settlement, including $12m in assets and the couple’s extravagant possessions, but nearly $200m remains missing or inaccessible. 

The details given would tell you that Quadriga-CX couldn't be trusted. If the company has no official bank account then shouldn't that be a red flag that something is wrong? Though, remember that the Legacy Group of Companies was once registered with the Securities and Exchange Commission (SEC). The very idea of being full of loose cash at Cohen's home already suggests something--it might be very possible that the money was meant for underground purposes. The money at home may have been sent for the Costa Rican money laundering operation. The documentary even showed how Cotten and his wife had a luxurious lifestyle as well. It seems that the operation to make a foundation in India may have been another legal front for monkey businesses.

Some of these details from his widow (if ever he's really dead) also reveal this from The Independent:

She began recalling whole conversations with Gerry that seemed entirely fabricated in retrospect. In one exchange, Cotten had been going on and on about the greedy Canadian government taking millions via taxes. Jennifer eventually learned that Cotten hadn’t been paying taxes at all.

In short, if the company isn't a registered taxpayer then why even bother? Zou in the same documentary even mentioned he wanted to avoid the two percent commission from the banks so he traded with Quadriga-CX.  Apparently, Cotten's scheme was so he could get rich without paying taxes. I'm not saying overtaxing can be a good thing. However, not paying taxes isn't a good thing either. Any company that's not paying taxes can't be trusted either. Taxes are used to finance government spending. Cotten accused the Canadian government of being greedy while he was indeed greedy himself. That would probably help explain why he preferred to use cryptocurrency in all his trading--it's because there's more anonymity and the identity isn't always clear.

It's one thing if people use anonymous names online for privacy reasons. Gaming communities just want to use names to look cool. Others prefer to use anonymous names while operating sites maybe as a trading name or just a preferred name. Many times, other writers also used pen names such as how Jose Rizal's real name was José Protasio Rizal Mercado y Alonso Realonda and he used the names Laong Laan, Dimasalang, and Plaridel. Eric Arthur Blair used the pen name George Orwell to publish his famous novel Animal Farm. Many times, pen names (which may come off as a trading name) are registered. Celebrities tend to use screen names like how Sharon Garcia Magdayao is known as Vina Morales. However, Gerry most likely didn't register any of his pen names when he was trading. Why would he? I doubt any of his pen names were registered as trade names! It's one thing to write with a pen name as a hobby. It's another thing to use a pen name in accepting payments using cryptocurrency. Besides, none of those screen names may have copyrights to make them even valid for business purposes. 

I think it would be one thing if I were trading with a certain "George Orwell Animal Farm" if this screen name is actually a company. This fictional company I created for fictitious purposes was registered in a bank as a company account. Another is how Severino Reyes created the fictional character Lola Basyang under a trademark. So, any sales of the book with the name "Lola Basyang" are still registered with the government for the purpose of taxation. It doesn't seem to be the case with what Cotten did with his Star Wars-inspired screen names. I could buy a book written under a pen name. However, I can't do trading under anyone who's purely anonymous. Sure, there's a privacy policy for trading but certain details are made public for a purpose. It's like how AXA or the Philippine Stock Exchange have their fund managers and brokers under their real names. So, while a person can still earn money under a registered pen name--what Cotten did was cheating nonetheless. I doubt that they were professional aliases too. 

Another warning is to be careful of first impressions

For one, Cotten seemed to be that very friendly guy. In fact, people were carried off by his charming charisma as this all-around nice guy. Sometimes the person you think is a flirt may not be a flirt. Sometimes, the person you wouldn't think is a cheat is a cheat. He had a very pleasant image and looked very professional. However, not everyone who looks nice can be trusted. I'm not saying that we should get rid of power dressing in businesses. Dressing up in good attire can help attract customers. The problem is that this guy misused his professional image according to the documentary. 

I was reminded of how some pyramid investors are rather very pleasant. There's such a thing as a very smooth talker. A smooth talker is someone who says very flattering things and may be confident that they can convince people. However, such a person isn't automatically honest. Sure, we have honest people who have confidence in what they say. There are swindlers who have a very good way of talking so they can deceive someone into giving in. It's pretty much like how I was talked into selling in credit to someone because she was a very smooth talker. It might be a lesson to some that if a person flatters you too much--be very careful! The person may be a sweet talker which means using insincere praise to persuade something to do something. It's possible to be a smooth talker but not use dishonesty. One could confidently talk about a functioning product as a smooth talker. Meanwhile, to sweet talk is to be dishonest in one's trade. A sweet talker would convince you to enter a too-good-to-be-true deal one way or another.

I think the case of Cotten was that he was a sweet-talker. How can you expect him not to owe at least 27,000 (recorded) cases of swindles? It took some time to know that he was actually a bad trader. The documentary compared what he did to gambling. I guess he sweet-talked people into investing with him so he could use it for his monkey business. Though their current website now redirects to another cryptocurrency service called CryptoQuadriga which claims to be not affiliated with QuadrigaCX Bitcoin Trading Exchange. I visited the site but as said--I want to avoid cryptocurrency because of its dangers from what I heard. It might make fast money for some but it seems to always operate at robbing X to pay Y like a Ponzi scheme.

It was interesting that someone who's currently known as QCXINT was there to reveal the details. Apparently, he chose to remain anonymous for privacy reasons. The person was also a victim and may have been harassed for all we know. A lot of details ended up creating the documentary that actually convinced me more as to why I'm not going into the cryptocurrency craze and neither should you. 

References

Documentaries

"Trust No One: The Hunt for the Crypto King", Directed by Luke Seewell, Distributed by Netflix 

Websites

"After losing $163 million in cryptocurrency, investors call to exhume Quadriga CEO’s body"

"'Bitcoin widow' reveals how she fell victim to her own husband's $215m scam after his mysterious death" by John Marcus (April 15, 2022)

Labels:

Popular posts from this blog

Open FDI Equals CHINA?!

This is an interesting drawing I found on Facebook. It's often used to portray people who look at the removal of the unnecessarily restrictive 60-40 shares ownership policy as, "The current president's gift to China." The same was done during former Philippine president Atty. Rodrigo R. Duterte. The same was also done with Philippine President Ferdinand R. Marcos Jr. It makes me think of stupid comments written by idiots on Facebook. It would be ironic if a lot of anti-FDI and anti-American rants were made not only on Facebook but also were typed using Apple gadgets of all things! They may be quick to use whatever irrational reasons. Some reasons can range from foreigners "unfairly" owning the means to produce equipment (read here ) and that they're simply forced to participate in the capitalist economy model to survive (read here ). However, I must ask if these guys were forced to use the luxury brands they're using (read here ). As the map shows, s
Read more

#SahodItaasPresyoIbaba Economics Will Ultimately Hurt the WORKING CLASS

Cartoonist Zach Some people claim to fight for the working class--while refusing to work themselves. Some people claim to fight for the working class--while supporting policies that will prove detrimental to the working class. One of these policies is #SahodItaasPresyoIbaba--meaning to raise salaries and lower prices. I wrote some time ago about why #SahodItaasPresyoIbaba doesn't work . However, I'lm still attacked by Ad Homimens and Nom Sequiturs. How's that even possible anyway? Economics isn't magic! If President Ferdinand "Bongbong" R. Marcos Jr.'s promise of PHP 20.00 kilo rice is absurd--so is the promise of #SahodItaasPresyoIbaba economics!  Image by Sabrina Jiang © Investopedia 2020 I don't need a PhD in economics to understand cost accounting. The income statement would include salaries as part of the cost. The cost of goods sold includes salaries. Marketing and promotions include salaries. General and administrative would include salaries. Pa
Read more

Is Anybody Willing to Prove Filipino First Policy Has a Place in the Rising Asian Century for a Million Pesos, Tax Free?

Yesterday was the birthday of former president Carlos P. Garcia, who died in 1971. Garcia is often associated with the Filipino First Policy. Back in the 1990s, I remember how Filipino First Policy was taught in values education classes --never mind the glaring contradictions. The contradictions are that imported equipment was used, or that we can literally never escape the use of imported equipment. I wrote an article discussing why Garcia's Filipino First Policy has no place in the rising Asian Century . I haven't done academic work right now, having been disgruntled by the Filipino education system. Sadly, not even graduate school taught me the basics of stock market investment (such as equity funds) or how Cash 2 Go works. That's why some people say, "It's just a degree!" I often said, "Well your doctor went to college, your lawyer went to college, etc." However, it looks like a college degree may not be for everyone, under K+12!  Some people are
Read more

Millions of Studies from the Trust Me Bro School of Economics Show #SahodItaasPresyoIbaba Business Model Works

Happy Labor Day anyone? It's this time of the year when labor groups like Kilusang Mayo Uno (literally the May One Movement) would protest. They would raise banners demanding #SahodItaasPresyoIbaba. For those who don't speak Tagalog, it means raising salaries and lowering the prices of goods. However, basic cost accounting will tell you that salaries are part of the cost of production . People ignore facts and choose their feelings a lot . I tell them that salaries are part of the cost of production (no need for a Ph. D for that, which I no longer aim to get) but they just sneer at it . They think the government has absolute control over the economy like magic . Members of Filipino labor groups may even say that wage hikes aren't inflationary even when evidence shows otherwise.  The  Economics Help   website presents why doing so can actually  worsen  inflation: Wage Push Inflation.  If labour is able to push for higher wages, despite lower growth, then we could get a combi
Read more

What's the Use of Complaining About Jollibee Acquiring Companies BUT Not Accepting Open FDI to Bring in COMPETITION to the Philippines?

Anti-Snowflake Squad Facebook Page I was checking across Facebook and noticed some idiots complaining about Jollibee acquiring companies. The same idiots turned out to be anti-FDI--the same group that converses with Porky Madugo and Mukhang Adik. As usual, I will not directly link the idiots (or even reveal them directly, they will reveal themselves) to avoid giving them clout. Here's a statement by Porky that may make anyone wonder if (1) he knows he's lying (which I think he is for some self-serving reason ), or (2) he doesn't know what he's talking about: The monopolization of business ruins the business. It degrades the quality of the business of a product.   If you think monopolization is good, that's stupidity. It kills the competition and it kills the business.   Well, as old saying goes: "capitalists are the only one will destroy themselves." Since when did capitalism mean killing competition? Isn't Porky supposedly a die-hard Communist? In the
Read more

La Salsa: The Delicious Filipino-Mexican Cantina at Lahug, Cebu City

La Salsa Facebook Page I've eaten at La Salsa Twice. I've tried eating at El Taquito (which is probably no longer operational in Cebu) and El Loco (which closed down years ago). I've eaten the Mexican American style of Red Lizard (read here ). La Salsa Filipino-Mexican Cantina offers a delicious blend of Mexican food for the Filipino customer. It's another experience for delicious Mexican-style cooking.  I've tried their beef fajita and enchilada. These are some of my favorite Mexican foods. For my first two dine-ins--I felt the cozy atmosphere of a home . I expected the enchiladas to be thinner but they are thicker. Perhaps, it's a different enchilada than the one I ate years ago. Both are delicious in their own way. I enjoyed the huger serving of enchilada.  Right now, it's still the soft opening. Some items won't be available at the moment. Based on my own personal review, I'd recommend this restaurant to anyone who enjoys fusion cooking. I love h
Read more

Forget About Open FDI, Let's Open #SahodItaasPresyoIbaba Stores Instead

A really disastrous decision! Before the Buwan ng Wika ends, I want to write about those who have been demanding "Sahod itaas! Presyo ibaba!" (Raise salaries, lower prices). Back in 2022, I wrote an article discussing why the demands for higher salaries, lower prices of goods, and handouts for all are a recipe for disaster . I could laugh at people who believed in the promise of PHP 20.00 per kilo of rice promise of Philippine President Ferdinand R. Marcos Jr. Before that, people had been demanding #SahodItaasPresyoIbaba during the reigns of the late former president Benigno Simeon C. Aquino III and former president Rodrigo R. Duterte.  Image by Sabrina Jiang © Investopedia 2020 I did explain why the model doesn't work. In the cost of production, you need to account for everything that happens including salaries . Raising salaries during inflation can actually worsen the situation . It's because sticky inflation happens with cost-push factors (ex. cost of gasoline, co
Read more

A Fun Song to Start Learning the New Pinyin Sequence

I was looking for a song in relation to the BoPoMoFo. In my case, I'm prone to calling Pinyin "BoPoMoFo" until today (read here ). It's because Pinyin basically serves the same purpose as Zhuyin--teaching one how to read Chinese. I'd like to say that I got too comfortable with this old sequence: I may hate memorizing Zhuyin but I like treating Pinyin in the same sequence. The new table which uses the 23 initials-24 finals method (read here ) can be confusing. Some old-timers may have an easier time transliterating the Zhuyin into Pinyin. However, I still find the new sequence confusing. I may no longer remember Zhuyin (and I kept failing at it and kept memorizing sentences without understanding) but I can remember Pinyin. Except my memorization of the Pinyin was in the BoPoMoFo sequence.  With more than a billion Chinese speakers worldwide--can we keep using the old books to teach Mandarin? That's why I wrote about why the old Chinese textbooks can't be us
Read more

"But the Philippines Isn't Taiwan!" is Just Another Lame Excuse to Justify Filipino First Policy

Atlas Institute for Internal Affairs   Happy Double 10 to Taiwan! Chinese Filipino schools would take part in what's often called the Double 10 celebrations. October is the 10th month and it's the 10th day. I remember talking about how Taiwan succeeded by accepting FDIs and how the Filipino First Policy caused us to fail . The typical response I would get on American-made social media (of all places), such as Facebook, would be, "How many times do I need to stress that the Philippines isn't Taiwan. We are the Philippines! We are unique!" If those fools did a study, they may realize that there's a link between the Taiwanese aborigines and the Filipino aborigines (read here ). The Philippines should've learned from Taiwan during COVID-19 One of the best models for fighting COVID-19 was Taiwan. Sure, I'm more in favor of shifting to a parliamentary system and Taiwan is still a presidential country (with parliamentary features).  Former Taiwanese president
Read more

The Pinaskohan Mentality is Keeping Poor Filipinos, POOR

Philippine Star Is it me or is the Christmas Season really that toxic in the Philippines? I wrote an article about the irony of early Christmas season with late Christmas shopping . I didn't think about writing this but is it me or do people like to ask for impunity during the Christmas season? Think about that toxic former friend or former romantic partner. You cut off that person because of the toxic behavior he or she shows. However, you meet at a public place during the -ber months. The person says, "Let's reconcile! It's Christmas!" I can be open to reconciliation with classmates with who I had a childish quarrel back in high school. So far, one of the people I had a childish grudge wasn't  a toxic person. The reason why I feel I can reconcile with that person is because he's productive . The same can't be said for people who have a toxic attitude.  What do several Filipinos look forward to during Christmas? Would it be just the spiritual signific
Read more