Crypto Company QuadrigaCX Has Ties to DeFi Company Wonderland

The now-defunct crypto platform QuadrigaCX went down as possibly the biggest crypto scam in history. Although the scandal was almost out of the news, QuadrigaCX has started circulating headlines again. This time, the platform is tied to the DeFi crypto company Wonderland. What's the tie between the two companies? What's the QuadrigaCX scandal?

QuadrigaCX was dismantled completely in 2020 and now Wonderland users are curious if the company has the same future. The QuadrigaCX co-founder was functioning as the anonymous treasurer for Wonderland.

In 2019, the Canadian crypto exchange QuadrigaCX collapsed. The exchange was founded by the late Gerald Cotten and Michael Patryn in 2013. The company announced that it was filing for creditor protection because it owed $190 million to users.

Cotton died of Crohn’s disease during his honeymoon in India with his wife Jennifer Robertson. In an affidavit filed with the Supreme Court of Nova Scotia, Robertson stated that the company owed 250 million Canadian dollars ($190 million) in crypto and fiat.

Overall, 115,000 users had remaining balances with 70 million Canadian dollars in fiat and 180 million Canadian dollars in crypto owed. The company’s exchange holds 26,500 Bitcoin ($92.3 million), 11,000 Bitcoin Cash ($1.3 million), and 11,00 Bitcoin Cash SV ($707,000). Along with 35,000 Bitcoin Gold ($352,000), the company has an estimated 200,000 Bitcoin ($6.5 million) and 430,000 Ether ($46 million). Totaling $147 million, Cotten was the only person with access to QuadrigaCX’s funds.

A stay of proceedings was requested while the company attempted to recoup the funds to no avail. All of the company’s business operations occurred on Cotten’s encrypted computer. Unnamed experts were hired to break into the computer, but their attempts haven't been successful. The time of Cotten’s death raised suspicions about whether the company was a scam and if he was actually dead.

The company's users weren’t notified of Cotten's death until a month after his passing. Robertson claimed that Cotten had created a “dead man’s switch.” He created a program that required him to check in to prove that he was alive. If he didn’t check in, an email with passwords and account information would be sent to Robertson, but she never received such an email.

Investigators discovered that Cotten had operated Ponzi schemes and created fraudulent QuadrigaCX accounts credited with illicit funds and made real trades. Investigators discovered that Cotten had a history of operating Ponzi schemes. His wife reportedly turned over all of her assets (worth $12 million) to attempt to recover the funds.

The Ontario Securities Commission concluded that QuadrigaCX was a Ponzi scheme. The company’s bankruptcy monitor received nearly 17,000 claims for refunds from affected users. It isn't clear whether refunds have been completely reissued since all of the funds were converted to the Canadian dollar equivalent. There wasn't any mention of how the crypto would be valued.

QuadrigaCX co-founder Michael Patryn was outed as the anonymous treasurer for Wonderland—a decentralized cross-chain reserve operating on the TIME token. Patryn was working as treasurer under the pseudonym "0xSifu" on Twitter. Before serving as treasurer, he was working as co-founder for QuadrigaCX alongside Cotten. However, Patryn jumped ship from the company three years after it was founded in 2013.

Patryn has an interesting history that many people in the crypto world have found questionable. Patryn has changed his name two times, first from Omar Dhanani to Omar Patryn in 2003 with the Canadian government. He changed his name to Michael Patryn in 2008. He was also charged with numerous crimes including conspiracy to commit credit and bank fraud, which he pleaded guilty to in 2005.

The crime involved $1.5 million in stolen credit and bank numbers when Patryn operated the website shadowcrew.com (which is now defunct.) This was followed by unrelated crimes including burglary, grand larceny, and computer fraud in 2007. Patryn served 18 months in prison before being deported to Canada where he became involved with cryptocurrency.

When his identity was revealed, the founder of Wonderland, Daniele Sestagalli, released a statement and confirmed the situation. She said, “I am of the opinion of giving second chances, as I have mentioned on Twitter.” She added that that community was divided over her decision to maintain him as treasurer.

However, amid the clamor, Sestagalli decided Patryn would step down until “a vote for his confirmation is in place.” Given the QuadrigaCX scandal, she assured the safety of the company’s funds, Sestagalli said, “All funds in Wonderland are managed by a multi-sign, and any fud related to that needs to be cut off now, as they are secured by me and the wonderland team.”