Brian Armstrong Speculates the Death of Quadriga's CEO Was Used as Cover for Mismanagement

Brian Armstrong, the CEO and co-founder of Coinbase, made a public statement speculating that QuadrigaCX-the exchange that lost $135 million in customer funds-may have used its CEO's death as cover for earlier mismanagement.

Brian Armstrong took to Twitter on Feb. 21st to share his perspective on what could have happened to QuadrigaCX. According to the CEO, it is possible that Quadriga used its founder's death to obfuscate an earlier "Multimillion dollar" loss of funds.

As background, Quadriga was the exchange that lost $135 million in customer funds when founder 30-year-old founder Gerald Cotten suddenly died due to complications with Crohn's disease.

Brian Armstrong had his company do its "Own internal research, including some blockchain analytics" to take a "Best guess" at what really happened with Quadriga.

If the exchange was pulling an "Exit scam" then "It likely would have been timed better," according to the CEO. Then, the CEO notes that Quadriga suffered a multi-million dollar bug in June of 2017 related to a smart contract error while sweeping ether to the exchange's hot wallet.

Because the exchange did not update its code properly when Ethereum's Geth software updated at the time, it resulted in funds becoming permanently trapped in an invalid contract.

Based on Armstrong's and Coinbase's research, this is when "Patterns of sends from cold storage suggest they tried keeping the exchange afloat." He even goes as far as to say that perhaps Quadriga attempted to "Trade their way out of a hole," suggesting that the exchange participated in risky cryptocurrency trading using customer funds.

Brian Armstrong then said that the 2018 bear market "Dried out" the exchange's liquidity and may have caused the earlier loss of funds to "Catch up" with them.

Armstrong points to withdrawal issues that customers were facing in mid-2018 as potential evidence that the exchange was struggling earlier.

Regardless of what really happened at Quadriga, based on court documents and statements from experts in the crypto community, it is likely that the exchange was mismanaged and did not take the precautions necessary to protect its customers' funds.