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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)

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