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How Badly Run Are Cryptocurrency Exchanges?

It's hard to believe how badly run these things are. Crypto is full of scams, money laundering and crime. The main scam is ponzi schemes: the price keeps going up as long as more "investors" buy in, and whoever the last round of buyers are will lose a ton of money. Crypto is not seeing a significant amount of use as an actual replacement for dollars and credit cards.

Anyway all the crypto exchanges are run by total amateurs who, knowingly or not, routinely commit financial fraud. And some examples can bring home what that really means:

Crypto Exchange Says It Can't Repay $190 Million to Clients After Founder Dies With Only Password

That's bad. Like really, really bad. It never occurred to them to be like "What happens to the company if our founder-CEO gets hit by a bus?" That's a standard question for startups. And this is certainly not the first time crypto money has been lost because a password was lost due to someone's death or another reason. That is a well known potential disaster. So they should have had protections against the well known danger, and they didn't. So that's awful.

But it gets way worse if you actually read the article. It's the kind of stuff that's hard to make up and would seem unrealistic if you made it up. It's so ridiculous:

Canadian crypto exchange [...] unexpectedly died in India

So he didn't even get hit by a Canadian bus. He died over in a risker country. Traveling to a less safe place wasn't enough to get them to be more careful.

The exchange holds [...] totaling $147 million, according to the affidavit.

And they owe $190 million. So they'd already lost $43 million before the founder died.

died “due to complications with Crohn’s disease

Crohn's disease is a chronic condition. So he didn't get hit by a bus, he died to a problem he already knew he had.

Cotten left behind no business records.

And yet people trusted him with $190 million.

As CBC noted, the Canadian Imperial Bank of Commerce froze $26 millions worth of QuadrigaCX’s assets in January 2018 “after finding irregularities with payment processing,” and a document from the Ontario Superior Court of Justice in 2018 concluded that “$67-million worth of transactions ended up improperly transferred into the personal account of Costodian Inc, the payment processor.”

They'd already had big problems with tens of millions of dollars a year earlier. It's not like everything seemed OK until this one disaster happened.

“This is a tough lesson learned,” Calgary customer Elvis Cavalic told CBC, adding that he had been unable to withdraw $15,000 in holdings in October 2018.

The end of the article has the coup de grace: customers couldn't actually get their money out months ago when the founder was still alive and the password wasn't lost. Cuz crypto is a mix of a joke and a scam. Stay the hell away.

Elliot Temple on February 4, 2019

Messages (5)

fuck off crypto sceptic

Anonymous at 4:59 AM on February 6, 2019 | #11794 | reply | quote

#11794 Do you have an argument against the position expressed in this post, or are you just virtue signalling in support of cryptocurrency?

oh my god it's turpentine at 10:34 AM on February 6, 2019 | #11795 | reply | quote

I find it weird that he's a visitor (probably an infrequent one) telling a blog author to fuck off from the author's own site.

Anonymous at 10:40 AM on February 6, 2019 | #11796 | reply | quote

> I find it weird that he's a visitor (probably an infrequent one) telling a blog author to fuck off from the author's own site.

Yeah that is weird

Anonymous at 10:43 AM on February 6, 2019 | #11797 | reply | quote

to be fair, the crypto community has enduring ideas like "if you don't hold the keys the coins aren't yours". they're not blind to these problems. I agree it's amaturish and bad that people lose money to preventable things. we know how to solve these problems and it's stupid we don't.

Anonymous at 2:51 AM on September 4, 2020 | #17801 | reply | quote

Want to discuss this? Join my forum.

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