Blockchain Researcher Releases Data Driving Their QuadrigaCX Suspicions

• Mycrypto's Taylor Monahan has released her extensive research into the known wallets of troubled exchange QuadrigaCX
• The data, she alleges, shows little or no evidence of deposits to Cold Storage but a long list of questionable transfers to other exchanges including Poloniex, BitFinex and Shapeshift
• Despite highlighting concerns via social and other media, Monahan urges caution regarding using data to jump to conclusions

Taylor Monahan, the CEO of open source wallet provider Mycrypto, appears to have been poring over the blockchain data related to known QuadrigaCX wallets in the past week or so. This work has led her to make some ostensibly startling discoveries regarding the way that it has been handling the multi-millions of Ethereum and Bitcoin it owes its currently locked-out clientele. 

In multiple tweetstorms and interviews, Monahan has aired her suspicions, citing evidence of a long-line of questionable transactions between Quadriga's Hot Wallets and multiple public crypto exchanges - including BitFinex, Poloniex and ShapeShift. These were most recently outlined to Laura Shin on the - aptly named - Unconfirmed podcast.   

Explaining her findings, which she began to release via Twitter almost immediately after the initial story regarding problems behind the scenes at Quadriga broke, she came to the conclusion that QuadrigaCX appears to have “Very little in the way of Cold Storage.” 

The Hot Question Of Cold Storage

This is a view that echoes the recent findings of research portal, Zerononcense , which appears to be the first to pick up the blockchain-based angle on what has been going on with the exchange. Last week, it alleged that “It does not appear that QuadrigaCX has lost access to their Bitcoin holdings. It is worth noting that there are several outgoing transactions that have been made since the alleged date of Gerald Cotten’s passing.” 

Her analysis, Monahan told Shin, is that there is “No evidence on consistent movements from know Quadriga wallets to a wallet that would fit the profile of ‘Cold Storage’.” 

What there is extensive evidence of, however, are large deposits with multiple exchanges. Monahan’s initial tweet storm on the subject, from February 4th first bought this state of affairs to light. The thread appears to expose a tranche of transactions between QuadrigaCX hot wallets and exchanges such as BitFinex, Poloniex and - most strangely, according to Monahan - ShapeShift. 

For example, she highlights a wallet that initially appeared to fit the profile of Cold Storage (multiple large deposits but relatively little movement) had actually then seen its funds redirected to BitFinex:

One last thing. Here's an example of an address that *could* have been cold storage: 0x185a3c26a1a5deb37c7fd02007b0fde19db61df3But...- It's empty now (sent to the Bitfinex deposit addr)- If every "cold storage" is this size, thats 100+ accounts- IT'S EMPTY NOW— Taylor Monahan (@tayvano_) February 5, 2019

 

As Monahan explained to Shin, as you would expect, the primary movement to and from the known QuadrigaCX Hot Wallets - at least the ones revealed in a previous post by the company on Reddit following issues last year - were between Quadriga and customers. 

“Besides that, we’re seeing a lot of Ether being moved to other centralised exchanges. Primarily, Shapeshift, BitFinex and Poloniex.” 

When asked to put numbers on the amounts changing hands, Monahan elaborated by saying that “This Poloniex deposit address has received 218,000 ether - which had an equivalent balance [Monahan has priced each transaction based on the value of the Ether on that day] at the time of $7.7m.” 

The ShapeShift Situation

“All of the ShapeShift stuff,” she goes on to explain, “is actually quite terrifying…” 

“The ShapeShift number we’re seeing as 325,000 ether, with a total equivalent value at the time of transaction of nearly $20m US dollars. So, when I say ‘significant’… it’s a lot.” 

All of the data on which Monahan is basing her finding has now been released to wider community in order for them to continue where she left off. It can be viewed and downloaded here.

Here's all the QuadrigaCX Ethereum data for your viewing & analyzing pleasure. Not sure how much time I'll have to spend on it in the next ~three weeks bc of travel, but at least this way it's out there.????https://t.co/XXD8lqKUEz— Taylor Monahan (@tayvano_) February 11, 2019

“I don’t really have any idea why they would ever move this money to an exchange, utilising ShapeShift is even weirder,” Monahan says.  “I really cannot understand why they would ever do this.”

Illuminating her opinion further, she adds that “ShapeShift is primarily for fast, easy transactions… So, for an exchange that is liquid and has heaps of customers trading, if they wanted to swap their Ether into Bitcoin - which is what they were doing at ShapeShift - that’s just not the place to do it because the amount they paid in fees and the higher spread on ShapeShift.”

“It just defies logic,” she concludes. 

Jumping To Conclusions?

In the hours since releasing the data, however, Monahan has been keen to deter people from taking her work and using it to jump to conclusions, however.

“I find myself making assumptions that should not be made,” she said in one tweet. The she used another to accuse fellow crypto-commentator, Zerononcense editor @ProofofResearch - who she had initially praised for the work delving into the matter -  of turning research into “baseless assumption & jumping to conclusions too quickly”.

The @ProofOfResearch account has made multiple assertions and allegations in the past few days regarding Quadriga’s actions, including what could have happened to the newly revealed missing funds highlighted in an initial report by auditors Ernst and Young . 

“Witch hunts are dangerous”, was Monaghan’s conclusion, however. 

Everything should be verified thrice, by multiple parties, preferably ones who have gotten enough sleep lately and can read. For those still believing the document posted...read the document. Skim the document. Ffs try to find the screenshot in the document. Don't trust. Verify— Taylor Monahan (@tayvano_) February 12, 2019

 

At present, QuadrigaCX is offline, having applied for creditor protection while it attempts to solve “liquidity issues, which include attempts to locate and secure our very significant reserves held in cold wallets” following the death of CEO Gerald Cotten, who died in India before Christmas. 

Online investigations have somewhat focused on the ‘suspicious’ circumstances surrounding his passing - including the startlingly timed making of a will just two weeks before his passing and the time it took Quadriga to announce his passing and provide any kind of proof.

However, with those issues seemingly fading into certainty, now the story is likely to turn to a postmortem of exactly how Quadriga was run during Cotten’s life - and how exactly it came to pass that he became a single point of failure for such a large cache of crypto, or whether that is a cover for something more nefarious and ongoing regarding the use of his customer’s funds.