Cover photo: Quadriga cofounder Lovie Horner
The QuadrigaCX story has fast dissolved from a tale of a locked laptop holding hundreds of millions of dollars to what may very well be the biggest case of corporate wrongdoing to ever hit Nova Scotian shores.
Named for Apollo’s four-horsed chariot of the gods carrying sunlight to the Earth, Quadriga presented itself as an industry leader, a fintech company expanding into merchant services, micro-transactions, even the cutting edge Internet Of Things.
When the QuadrigaCX online coin exchange opened December 26, 2013, it offered users better prices for their Bitcoin than other Canadian exchanges. With no trading fees for the first three months of operation, it quickly gained market share. By April 2015 it was the largest cryptocurrency exchange in Canada, holding more than $2 million of its clients’ money in the form of Canadian and US dollars, Bitcoin, and gold.
Quadriga’s revenue model was simple. It took one per cent of each trade on its system, splitting the fee equally between buyers and sellers. Bitcoin Automatic Teller Machines placed in several major Canadian cities took one per cent of each ATM transaction. There was a small fee when clients withdrew cash from their QuadrigaCX accounts.
Clients were assured of safety and security at every step. The company’s cryptocurrency reserves were insured by third parties, Quadriga claimed repeatedly in company documents and interviews to eager cryptocurrency news sites. Quadriga employed industry-leading Anti Money Laundering (AML) and Know Your Customer (KYC) client identification protocols and was the first Bitcoin exchange to be registered with FINTRAC, the Financial Transactions and Reports Analysis Centre, the Canadian government’s financial intelligence unit reporting directly to the Minister of Finance.
Except it was all lies.
In fact, most of Quadriga’s working capital came from loans and sales of stock; the exchange posted a loss for most of its first two years. The company’s financial statements showed no sign of the hefty insurance premiums that would be required to offset the risk of covering the ever-increasing amount of cryptocurrency passing through its servers. And FINTRAC is very clear that Quadriga is not now nor has it ever been registered with the agency.
And the truly incredible part of this story is all of this information was freely and publicly available online for the past four years — if only anyone had thought to check.
Lovie Horner and Mike Patryn
In the summer of 2013, Lovie Horner, a 28-year-old fashion design student from Montréal’s LaSalle College was in Vancouver with an internship at the University of British Columbia, where she worked on some of the costumes for the university’s production of the opera Carmen. Drawn to the strength and power of combat sports, and particularly the grappling and chess-like wrestling holds of Brazilian Jujitsu, she met Mike Patryn, a fellow BJJ fighter and aficionado in his early thirties. They married.

Patryn was an angel investor and a cryptocurrency expert with experience in the field going back to 2002. He made light of the fact that his degree from the University of California at Santa Barbara was in Social Psychology, not Finance or Economics. He claimed his BJJ fight record was an impressive 7-1.
But Mike Patryn not only does not hold any kind of degree from U of C Santa Barbara, his BJJ record is not listed on any major fighting record site.
Back in 2004, there was a 22-year-old member of the Shadowcrew message board named Omar Dhanani who went by the nics “Voleur” and “Jaeden.” Dhanani worked as a product reviewer of illegal goods and info as well as a vendor, was a forum moderator on the Shadowcrew illegal marketplace website, and offered money laundering services for a 10 per cent fee. Dhanani also went by the name Omar Patryn and was deported to Canada in 2009.
Shadowcrew members were arrested and charged in the state of New Jersey in 2004 with multiple counts of identity theft, fraud, credit and debit card fraud, and making false IDs.
Mike Patryn denies that he is Dhanani.
Corporate records show Mike Patryn and Omar Dhanani’s brother Nazmin were partners in MPD Advertising Inc, a Vancouver company established in 2009 that closed in August 2013. As well, Patryn talks in videos of negative experiences with various cryptocurrencies and illegal markets in the US that align with Omar Dhanani’s experiences, and Patryn is adamant when talking about global market expansion of Quadriga that it will never expand into the US due to their “hostile regulatory environment.”
Regardless, in the summer of 2013, Mike Patryn and Lovie Horner frequented Vancouver’s Bitcoin Co-Op and met 25-year-old Gerald Cotten, a York University Schulich School of Business graduate who had been working with other digital currencies and was transitioning into Bitcoin, as he put it in a 2015 interview.
The three talked about the difficulties in purchasing Bitcoin in Canada — at the time, Cotten recounted, it meant sending a wire payment to Japan, home of the now infamous Mt Gox Bitcoin exchange that eventually lost millions of dollars of its clients’ money and suddenly closed.
The short-lived crypto dream

Gerald Cotten and Lovie Horner set up 0984750 BC Ltd on November 4, 2013, doing business as Quadriga and QuadrigaCX. Their chariot of the gods first took flight on Boxing Day.
By Halloween 2014, its official corporate year-end, 0984750 BC Ltd was to become the wholly owned subsidiary of Whiteside Capital Corporation, formed two weeks earlier whose sole business was to own 0984750’s shares. In turn, two weeks later Whiteside become the wholly owned subsidiary of Ancetera Networks Ltd, co-founded by Cotten and Mike Patryn. In a cash and shares payout, a percentage of Horner and Cotten’s original shares become shares of Ancetera.
As an aside, looking up the origin of the word ancetera brings up two references, one a Cicero quote in Latin lamenting the comparative lack of reason in the wider world; the other, from a 1677 treatise, also in Latin, is the phrase ‘ancetera de mendacio veniant’ which means “ancestors of falsehood.”
Starting out as a regular company with a physical office in Vancouver, originally as co-tenants with the Bitcoin Co-Op, 0984750 BC Ltd posted a $105,000 loss with a very modest $18,000 in revenue that first year.
On January 26, 2015, Ancetera Networks became Quadriga Fintech Solutions Corporation. Directors were Cotten and Horner with chartered accountant William Filtness and Jacques/Jack Martel. Martel was paid to serve on the board.
Despite his billing as Quadriga Fintech co-founder, Patryn was not listed as a director of the company on the paperwork Quadriga Fintech filed with the B.C Securities Commission.
For Quadriga Fintech, 2015 was a year of growth. With the collapse of rival exchange Calgary-based CAVIRTEX, QuadrigaCX’s business was booming. Reputable financial firm Malaspina Consultants was put in charge of all Quadriga Fintech’s books and Malaspina put Natasha Tsai on the Quadriga Fintech board as Chief Financial Officer.
Quadriga Fintech released glowing news reports through 2015 as it set itself up for its biggest influx of cash yet, putting its stock up for sale on the open market and letting the general public get a taste of that chariot ride.
Behind the scenes, the actual work of Quadriga was farmed out to a range of companies, sub-contractors, and sub-contractors to sub-contractors.
Gerald Cotten was Quadriga’s CEO and chief shareholder, and was given free hand to trade on behalf of the company. Meanwhile, Lovie Horner was both Quadriga’s Vice President of Business Development and also a contractor hired by Quadriga — Horner was the signatory on a contractor company called Connect Development Ltd, based in the United Kingdom. The contract between Quadriga and Connect Development contained this clause:
4. The Company [Connect Development] agrees to undertake (the Services) to the Client [Quadriga] (“The Contract Works”). How the Company fulfils [sic] its contractual obligations is a matter for the Company.
“The Services” were unspecified in the contract, but Connect Development warranted it was qualified to perform them. Among other standard employee rights that were waived under the terms of the contract, Connect Development’s employees could expect no holiday or sick pay.
Quadriga Fintech only released three quarterly financial statements for its second accounting year. The final one, covering the quarter ending in July 2015, showed the company holding more than $1.7 million in clients’ cash and more than $2 million of their Bitcoin and gold. The statement claimed revenue of $119,000 for the first nine months of the accounting year, with expenses of $1.25 million.
A lot was riding on the public stock sale. A private offering was made at the end of 2015, bringing in some much needed cash. The big day would be in early 2016, pending final approval of the BC Securities Commission. Quadriga submitted its Preliminary Long Form Prospectus the end of November 2015 and released ever more glowing preliminary prospectuses and news releases of new developments.
Mike Patryn and Gerald Cotten talked up Quadriga at every turn. Interview shows with cryptocurrency groups, live Q&A sessions with the Bitcoin Co-Op, opening of a Bitcoin Embassy in Montréal, announcing a Blockchain R&D Lab.
The stories got larger: Quadriga’s cryptocurrency reserves weren’t just insured, they were insured by Lloyd’s of London. Quadriga was not just registered with FINTRAC; it was actively working with FINTRAC to develop new AML standards.
Then it all went south. Quadriga saw the resignations of directors, announced new directors, and in turn the new directors resigned until only Gerald Cotten was left.
The BC Securities Commission stopped trade on Quadriga Fintech shares on March 8, 2016 because Quadriga Fintech had not filed year-end financial statements with the commission. The documents never would be filed. The last Quadriga Fintech Annual General Meeting, which was supposed to include a triumphant announcement of the public stock offering, was cancelled.
No outsider saw any financial statements from Quadriga Fintech again until the Companies’ Creditors Arrangement Act documents filed by Cotten’s widow Jennifer Robertson with the Nova Scotia Supreme Court in January 2019. Those documents claim there are no accounting records of any kind for Quadriga Fintech, that $70 million in user cash and about $190 million in user cryptocurrency is missing, and that assets available to them are substantially less than that.
Gerald Cotten had died in December 2018. He was 30 years old. A story in the New Indian Express dated February 6, 2019 says in addition to his Crohn’s Disease, Gerald Cotten was receiving monoclonal antibody therapy for colon cancer.
With Cotten apparently aware his time could be short, he made every effort possible to protect his wife’s interests with an exhaustively detailed will witnessed by lawyer Dianna Burns in her Halifax office. His $10 million estate consisted of real estate (including an island in Mahone Bay off Western Shore near Chester), a high-end sailboat, and a Cessna aircraft. Passphrases are explicitly mentioned in a will clause declaring that his executor, Ms. Robertson has full access to them.
“Cold wallets” and “hot wallets”
A large element of the Quadriga story has been coverage of its now famous cold wallets, a treasure chest with some $190 million of cryptocurrency. It’s worth reviewing how this ought to work, if everything were being run on the up and up.
A cryptocurrency exchange is the go-between for people possessing a cryptocurrency to sell to people with cash. The seller deposits the cryptocurrency to an address given the seller by the exchange. Once the transaction has been confirmed, the cryptocurrency is in the possession of the exchange, in a “hot wallet” — that is, the cryptocurrency is online and available for transfer. Only when a cryptocurrency wallet is on the internet can the cryptocurrency it contains be transferred or spent.
It’s not a good idea to keep any large amount of cryptocurrency in an online wallet, as it presents a tempting target for hackers looking for device and system vulnerabilities to exploit and gain wallet access. As a result, the cryptocurrency exchange should, as its hot wallet grows in size, deposit money to its “cold wallet” — one or more addresses of wallets not on the Internet, such that funds can be deposited but not transferred or sold.
From time to time, the cold wallet should briefly go online to transfer funds as needed to top up a hot wallet.
Since cryptocurrencies have a public ledger containing all transactions and their times, it should be fairly easy to look at cryptocurrency going into an exchange’s hot wallet addresses and find those select transaction addresses that only accept deposits from and make occasional payments to those hot wallet addresses. These would be the addresses of the exchange’s cold wallets.
In point of fact numerous blockchain researchers have been unable to do this in Quadriga’s case using known QuadrigaCX receiving addresses. One possible explanation could be “coin tumbling,” an attempt at anonymizing or at least making transactions harder to track by breaking the transactions into random sized smaller sums and transferring them through a number of different addresses under the exchange’s control.
If this were the case the sums should eventually end up in the cold wallet addresses at the end of the transaction chain, but researchers looking at Quadriga have not been able to confirm this either.
Each cryptocurrency transaction has a small transaction fee, paid to the miner mining the block in the blockchain, or in other words recording all transactions since the last block was recorded in the public ledger. Coin tumbling transaction fees would soon add up to a tidy sum, especially if larger volumes were being tumbled.
By Nova Scotia Supreme Court order, all Quadriga Fintech assets remain in the possession of Quadriga Fintech. Jennifer Robertson, her stepfather Thomas Beazley, and 2014-2015 board member Jack Martel are now the Quadriga Fintech board, enacted with the approval of Robertson and her 41 per cent of shares and Lovie Horner and her 10 per cent of shares. Michael Patryn’s Hong Kong-based company Crypto Consulting Group Ltd owns 17 per cent of shares (or perhaps options on them), but he prefers to remain off to one side for now.
Court-appointed monitor Ernst & Young are to oversee all transactions while Quadriga is under 30 days of creditor protection.
Clients of QuadrigaCX are left with some disturbing possibilities — and it’s possible the missing money is not the worst of it.
We now know all QuadrigaCX’s day-to-day business went through a network of
contractors and sub-contractors, some still sitting on sums of money Quadriga says it owns.
Something not being discussed is how some of those near unaccountable sub-contractors have thousands and thousands of copies of client identification verification documents in their possession.
Everything one would need to sign up a trading account on a cryptocurrency exchange in that client’s name, in fact.
NOTE: Affected clients of Quadriga should consult court-appointed monitor Ernst & Young’s website for more information.
Wow, this is good stuff. Well done!
Thank you! This story is very much in motion and there’s still a lot more to come out. I think it’s a safe statement that there’s never been anything like it in Nova Scotia before.
WOW. Hopefully someone is consulting the Financial Crime experts with the RCMP in Halifax about this apparent mess and askIng who owns all the missing money and from where it originated. Money Laundering?
It’s an amazing story with amazing sauce poured all over it. We don’t know what happened. As the story says, things went south, the world lost contact with Quadriga, then stuff happens, then the place is near broke. It ran for years with a more or less constant background noise of people complaining of late payments but for the most part people got what they came for until the one guy carrying the load and keeping all the balls in the air passed.
If some of the speculation of what happened turns out to be true, Gerald Cotten would have to have been a polymath of surpassing ability to have kept the web of Quadriga activities in motion and balance. An honest to gosh top tier master criminal. Professor Moriarty level.
So the story so far is like a crashed jet’s black box. We have records up to whatever happened and we can see the wreckage. Now it’s trying to put the bits together.
The road forward here for an honest Quadriga Fintech executive would be to publicly release the exchange’s complete list of hot wallet addresses for all the different cryptocurrencies they hold. These were in use through December and January after Cotten’s death so QED are known to Quadriga. Even if the cold wallet addresses are not currently known to Quadriga, they can be deduced from blockchain analysis of the complete list of hot wallet addresses.
If they exist.