Inside The Strange Tale Of Quadriga, The $215 Million Bitcoin Ponzi Scheme


Dr. Katie Spalding

Katie has a PhD in maths, specializing in the intersection of dynamical systems and number theory.

Freelance Writer


Gerald Cotten scammed investors out of more than C$200 million. Then, suddenly, he died. Image credit: Jaiz Anuar/

If you spend much time online, it’s pretty common to hear the worlds of cryptocurrencies, NFTs, and the like described as “scams.” But while it’s certainly something of a financial wild west out there – albeit a wild west populated by bored apes and libertarian nightmare ships – crypto enthusiasts will usually say that such descriptors are at best hyperbole.

Sometimes, though, the people calling crypto schemes “scams” are bang on. Just ask Tong Zou: he lost half a million Canadian dollars – his entire life savings – in what investigators later called “an old-fashioned fraud wrapped in modern technology.”


“It just makes me more depressed about it,” he told Sky News. “I could have invested it in real estate. I could have put it in stocks.

“So far, nothing's been found. It sucks.”

But how did Zou, along with tens of thousands of other crypto investors, lose such a gargantuan sum?

It all started about three years ago, when Gerald Cotten was reported dead at age 30 from complications with Crohn’s disease. Cotten was the co-founder and CEO of QuadrigaCX, the largest cryptocurrency exchange company in Canada, and according to his widow, he held “sole responsibility for handling the funds and coins” on the exchange.


With the information required to access the financial databases stored on a laptop protected by passwords known only to Cotten, QuadrigaCX was forced to admit that the crypto savings totaling more than C$200 million had been lost, possibly forever.

So far, so unlucky. But in the months following Cotten’s death and QuadrigaCX’s subsequent bankruptcy, the Ontario Securities Commission (OSC) – as well as an army of anonymous Twitter, Reddit, Pastebin, and Telegram accounts – started delving into the case.

What they found was nothing short of fraud on a massive scale.

Cotten “ran the business as he saw fit, with no proper system of internal oversight or controls or proper books and records,” the OSC’s report revealed back in 2020, and “did not register [QuadrigaCX] with any securities regulator.


“This lack of registration facilitated Cotten's ability to commit a large-scale fraud without detection. So did the absence of internal oversight over Cotten,” they explained.

In fact, despite being a scam that could seemingly only take place in the 21st century, QuadrigaCX turned out to be nothing more than a good old-fashioned Ponzi scheme: Cotten had been taking money from new investors and using it to pay off old investors – all the while taking a hefty (and misappropriated) cut for himself to fund his lavish lifestyle.

But that wasn’t all. As early as 2015, Cotten was also creating dozens of fake accounts to stimulate trading on his platform – fake accounts that were filled with fake crypto. By the time he died, these accounts – some of which were named things like Aretwo Deetwo and Seethree Peaohh – had made hundreds of thousands of trades, selling their fake Bitcoin for real currency.

“I kept asking them: Where's my money? - October, November, December – during all that time,” Zou told Sky News. “They kept saying it was the lawsuit … I just prayed. I really prayed it wasn't a scam.”


“At that time, there was nothing I could do. There was no way of getting my money back,” he added. “Once I deposited it, it was basically gone.”

And then, amid mounting legal troubles and customer complaints of missing or inaccessible funds, Cotten died.

But there’s another twist in the tale. Because strangely – suspiciously, perhaps – dying might have been the best thing that could have happened to him.

See, if Cotten were alive, he would be in big trouble right now. According to OSC calculations, he owed a total of around C$215 million, only a fifth of which has so far been recovered.


“Under normal circumstances, these findings would likely have led to an enforcement action against Cotten and/or Quadriga,” the agency wrote in its report. “However, this is not practical given that Cotten is deceased and Quadriga is bankrupt, with its assets subject to a court-supervised distribution process.”

And that’s why – despite affidavits from Cotten’s widow, the hospital where he died, and the funeral home that prepared his body for burial – some people think the crypto conman might still be out there.

“They [the FBI and RCMP] asked me about 20 times if he was alive,” one witness who has intimate knowledge of Quadriga’s workings told Vanity Fair. “They always end our conversations with that question.”

Meanwhile a Quadriga creditor and cryptocurrency expert going by the handle QCXINT told the magazine that Jennifer Vander Veer, the lead investigator in the FBI’s cybercrime division, had told him that the truth of Cotten’s death is “an open question.”


If the authorities are bamboozled by the case, so too are those who considered themselves Cotten’s friends and colleagues. He was “not an evil dude,” Freddie Heartline, a founder of the Bitcoin Co-op, told Vanity Fair; “like a ray of sunshine,” according to longtime associate Michael Patryn (Patryn would later be outed as convicted thief and fraudster Omar Dhanani by Redditors and journalists.) Even his wife reported feeling “upset and disappointed” when she learned of Cotten’s “improper” business practices.

Was it any wonder, then, that so many investors were drawn in by Cotten’s scheme?

“A lot of people want to blame just me for this,” Zou told Sky News. “Yeah I deserve some of the blame because it's irresponsible. I should have done more research … [but] How could I know?”

“I did some research on Reddit. They said: ‘Oh it's going to take a while but you always get your money. It's not a scam’,” he said.


“I guess I trusted [Quadriga] a lot … It turned out to be a scam.”


  • tag
  • money,

  • Bitcoin,

  • crypto