Death in the Time of Bitcoin

By now, you’ve read about the co-founder of QuadrigaCX, Canada’s largest cryptocurrency exchange, who died in India and took with him the keys to unlock C$190 million ($144 million) in his customers’ Bitcoin, Ether, and other digital currencies.

But, dear reader, don’t think this is another reductive Nouriel Roubini–type crypto grave dance. No, this tale of “boy meets girl; boy marries girl; boy stores all client cryptocurrency data on cold wallets with no backup; boy dies; more than 115,000 people get screwed out of their precious crypto” could have a happy ending for a progressive asset allocator.

但首先，Quadrigacx的故事。

它看起来Quadrigacx联合创始人兼首席执行官杰拉尔德·贝特在12月9日在印度死于克罗恩病的并发症。我说“出现”，因为阴谋理论正在飞行web和reddit., spurred on by such facts asCotten's signing a new will less than two weeks before his death。

According toBloomberg, “Cotten was always conscious about security — the laptop, email addresses, and messaging system he used to run the five-year-old business were encrypted, according to an affidavit from his widow . . . . He took sole responsibility for the handling of funds and coins and the banking and accounting side of the business and, to avoid being hacked, moved the ‘majority’ of digital coins into cold storage.” (Cold storage, aka cold wallets, is a security technique that generates and stores a cryptocurrency’s private keys in an offline environment, like on paper or a USB drive.)

His security measures were admirable given that digital currency exchanges suffered at least five major attacks last year.

Cotten’s wife and now executor to his estate, Jennifer Robertson, reported (and the QuadrigaCXwebsite确认）她无法找到密码或Quadriga账户的任何业务记录;experts hired to try to hack into Cotten’s other computers and mobile phone had only "limited success,” she said in a court filing. Without the digital keys, clients cannot access their personal digital wallets, effectively stranding their cryptocurrencies. At the time of this writing, QuadrigaCX had been granted an order for creditor protection in Nova Scotia Supreme Court.

在Twitter帖子中，另一个加密货币交易所的首席执行官将Quadrigacx局势描述为“奇怪的，坦率地，令人难以置信的故事”。

但我发现这个故事既不是奇怪也没有难以置信。多年来，麻烦的迹象很明显。

For example, when QuadrigaCX became Canada’s largest digital exchange in 2015, it stopped publishing financial audits. Around the same time, three of its directors and its chief financial officer resigned. Also in 2015, QuadrigaCX announced a planned reverse initial public offering, but that was later刺了因为公司未能提供所需的财务审计。2017年6月，Quadriga宣布它有损失了1400万美元的国内due to a software glitch.

但这些只是杂耍表演a much darker affair: At the time of his death,Cotten was the sole officer and director at QuadrigaCX。他的联合创始人Michael Patryn曾经apparently left the company sometime in early 2016，但他的辞职从未正式宣布过。

Maybe it was not announced because, according to新闻报道，“Michael Patryn”是Omar Dhanani的别名 - 同样奥马尔Dhanani被定罪美国联邦法院2005年11月用于管理和运营“ShadowCrew.com”网站，是贩运被盗信用卡和银行卡号码和身份信息的最大的在线中心之一。“它也是奥马尔·达纳尼的同一个，在2013年，是chargedby Montreal authorities as “the alleged ring leader of an online criminal organization which laundered millions of dollars over a five-year period.”

然而，出于这一明显的悲剧和行政垃圾场火灾，产生了向前思维资产分配者的独特机会：有机会在投资组合中添加汞合金的机会，以急需折扣面对面值。

An asset allocator that is at least marginally bullish that crypto prices will increase and/or that technology will improve to the point where it will be able to crack the encryption of the cold wallets could find this opportunity quite attractive.

当然，这种深价播放的最佳情景是资产被解锁和加密值的增加，提供了一个如此液体资产的意外收获。

A less bullish scenario would be that the assets remain stranded but the cryptos appreciate, increasing the portfolio’s mark-to-market value and perhaps generating offers from the secondary market to buy the portfolio.

Then there is the reverse situation, where the wallets are unlocked but the digital currencies remain underwater, presenting the owner with the traditional sell/hold decision.

Of course, the assets could remain forever stranded and cryptos could go to zero, resulting in the loss of the entire investment (unless it were hedged with listed and OTC crypto derivatives).

现在，反对意见。

“用于加密客户的冷钱包的安全性是不可选择的。”

This investment is likely measured in decades, not days (which is why the natural buyer is an asset allocator, not a hedge fund or private equity manager). It seems highly likely that sometime in the next 25 years, technology and computer power will evolve to the point where they will be able to overpower today’s best defenses. (And anticipating another problem, the successful hack of an individual wallet is not the same as a hack of a cryptocurrency.)

“An asset allocator lacks the technical ability to hack the wallets.”

正确，但有一个解决方案：模仿Netflix并提供奖品 - 可能是钱包的价值的百分比 - 到可以闯入冷钱包的白帽黑客。

“如果Cotten还活着，那么偷走了客户资金，并在南美洲的林上？”

欺诈仍然是一个真正的可能性。正如本文的发布，Quadrigacx的显示器，Ernst and Young, identified deliberate, questionable activity in six cold wallets. Yet,Zerononcense是一个加密研究和咨询业务，声称在Quidrigacx Ethereum中发现了超过1亿美元。买家小心。

“我如何确定钱包中的货币的当前成分和价值？”

“What if a new type of digital asset replaced Bitcoin, Ethereum, Litecoin, etc.?”

亚达yada。提高这些和数十个其他异议的投资者不会是冷钱包的买家。

That investor will see the opportunity for what it is — a purchase of distressed assets (namely the cold wallets) — and will identify and measure the associated risks, structure the deal to mitigate the risks (e.g., adding a claw back covenant to protect from fraud) and price an offer that reflects these risks, which I assume will be a fraction of the portfolio’s face value.

因此，到那种冒险的资产分配器，这些资产分配器已经疲惫不堪，杏仁农场和小市场印度信贷交易，加拿大广播公司reports that QuadrigaCX’s lawyers are standing by to take your call.