From the Magazine
Holiday 2019 Issue

Ponzi Schemes, Private Yachts, and a Missing $250 Million in Crypto: The Strange Tale of Quadriga

When Canadian blockchain whiz Gerald Cotten died unexpectedly last year, hundreds of millions of dollars in investor funds vanished into the crypto ether. But when the banks, the law, and the forces of Reddit tried to track down the cash, it turned out the young mogul may not have been who he purported to be.
This image may contain Human Person Vehicle Transportation Boat Yacht Sailboat Watercraft and Vessel
HIGH LIFE
“I’d like a boat I can cruise locally and then take south.”
Illustration by Bianca Bagnarelli.
“THE MERCY OF THE WAVES”

The smiling boy visited Sunnybrook Yachts in the summer of 2017, after the value of Bitcoin had reached an all-time high, having tripled in five months. Sunnybrook is the largest yacht brokerage on Canada’s east coast. Its clients tended to be surgeons and litigators and C-suiters who travel from Toronto and Paris and Hawaii to summer in Nova Scotia; their wives wear silks and Manolos and perfect fingernails that cost $300 yesterday at the salon. The smiling boy stood out. He wore a wrinkled golf shirt, cargo shorts, and beat-up Birkenstocks, and he was obscenely young, with sandy hair and pale skin that appeared not to have seen sunlight since puberty. He was accompanied by a girlfriend who drove her own Jeep. They struck the yacht salesman as a couple you’d less likely see at Scaramouche than in a Walmart parking lot. Most conspicuous was the odd way that the young man always seemed to be smiling. It was a gentle, unflappable smile. It put strangers at ease; it made him seem lighthearted. It was difficult to imagine that this particular trait was contrived, but later, after it was revealed that nearly everything about him was a work of pure contrivance, you had to wonder whether the incessant smiling was just another part of the act.

This summer day, however, he was dead serious. The smiling boy wanted a big boat.

“What’s your goal?” replied the yacht salesman, in the delicate manner of his trade. A yacht salesman never asked what customers were “looking to spend,” or whether they had ever been on a yacht, let alone knew how to operate one. He summoned a future in which the customer was already a proud captain astride a luxury pleasure vessel dividing a turquoise sea.

“I’d like a boat that I can cruise locally,” said the smiling boy, “and then take south.” He wanted to reach the Caribbean without having to stop in Canada or the United States.

That would require an extra fuel tank, the salesman explained, and a desalination system for drinking water. They settled on a customized Jeanneau 51 with a pink and cream interior: three cabins, a dining area for six, a dishwasher, a gas stove, a washer and dryer, an en suite bathroom with standing shower, and a swim platform with teak battens. When offered an electric motor for the life raft, the smiling boy gestured to his Tesla in the marina’s parking lot. “Sure,” he said. “I love electric.” The whole thing would cost $600,000, but expense never came up—only safety. He named his boat the Gulliver, after the traveler who trusted himself to the mercy of the waves and swam as fortune directed him.

Over several dozen hours of sailing lessons, the yacht dealer learned a few things about his customer. His name was Gerald Cotten, and he went by Gerry; his girlfriend was a property manager named Jennifer Robertson, or Jen; her two Chihuahuas, who liked to sun themselves on the deck as the Gulliver negotiated the islands and shoals of Mahone Bay, were Nitro and Gully. One of those bay islands—four acres of pine encircled by black sand—Cotten purchased that summer. He cleared trees and built a house, though he had no apparent plans to move in. The couple lived in a three-bedroom in Fall River, north of Halifax, a rich suburb only recently carved out of a forest near a long dark lake; Cotten owned a third home in Kelowna, in British Columbia’s wine country; a fourth in Calgary; and 14 rental properties in Nova Scotia, including, in Bedford, every house on a dead-end street. There were also the Lexus and the zippy single-engine airplane, a Cessna 400, which he’d never tried to fly. The couple traveled abroad constantly, and they planned to sponsor a home for 12 children at an orphanage in India. In India, Cotten remarked, the Canadian dollar went a long way.

Cotten rarely brought up his work, but details emerged. He was a founder and the CEO of Quadriga, Canada’s dominant Bitcoin exchange—something like TD Ameritrade for cryptocurrency. He ran the business from his MacBook Pro, which he always carried with him. Once he left it behind on the Gulliver, which caused a momentary hysteria as the yacht had already departed the dock. He had Crohn’s disease and seemed to subsist on hummus; when others drank beer, he produced bottles of hard cider. He loved to fly: planes, helicopters, drones. He seemed like the kind of guy who might retire early to an island somewhere.

OFFICE SPACE
“Four desks in a weird room, no business operations going on. It looked hollow.”


Illustration by Bianca Bagnarelli.

Cotten returned for lessons the following summer, though not as often. He was busy. Then, in December, Robertson called Sunnybrook to explain that Gerry, while on their honeymoon in Jaipur, had died suddenly. She wanted to sell the Gulliver. When national news articles began to appear a month later, they emphasized another detail: Cotten was the only person with the passwords to the accounts holding Quadriga’s funds—cryptocurrency and cash—worth approximately a quarter billion U.S. dollars. Nobody knew how to find the money.

The yacht salesman had questions, though it was not his job to ask questions. More than 75,000 Quadriga account holders also had questions. The Nova Scotia Supreme Court declared the company bankrupt and selected the accounting firm Ernst & Young to serve as its third-party monitor, responsible for securing the lost funds belonging to Quadriga’s creditors. Additional investigations were begun by the Royal Canadian Mounted Police; the FBI; and at least two other law enforcement agencies that have not been publicly disclosed (though one of them is likely a federal agency in Japan). The most effective and thorough investigation to date, however, has been conducted by anonymous accounts posting on Twitter, Reddit, Pastebin, and Telegram. Their findings, though baroquely technical, could be distilled to a two-word conclusion:

Gerry’s alive.

“HE WAS NOT AN EVIL DUDE”

The initial portrait of Cotten that emerged in February 2018, once his death was announced through a Quadriga Facebook post, squared with the yacht salesman’s impressions. Cotten was a computer nerd who had entered the right business at the right time and succeeded beyond his wildest dreams. The broad outlines of his story were blandly conventional, at least if you subtracted his interest in decentralized monetary systems. He grew up in a large brick house on a quiet suburban street in Belleville, “The Friendly City,” a waterfront community between Toronto and Montreal best known for its cheddar cheese. In 2010 he graduated with a bachelor’s degree in business administration from an honors program at York University’s Schulich School of Business in Toronto. His parents owned an antiques store; Cotten decided to go into crypto.

A couple of years after graduation, Cotten moved to Vancouver and joined a clubby community of entrepreneurs who had become enamored with Bitcoin. He attended meetups at coffee shops and dorm rooms, organized by a core group of about 10 people, who called themselves the Vancouver Bitcoin Co-op. Most of these early acolytes were drawn to the digital currency’s libertarian ethos, its promises of decentralization, transparency, speed, and independence from governments and financial institutions. Bitcoin would enable more than two billion people who lacked access to banks to send and receive payment; it would offer stability to citizens of countries with chaotic currencies; it would eliminate all banking fees.

Cotten knew the catchphrases and the talking points, but he seemed most interested in Bitcoin’s speculative possibilities. The first Bitcoin block was created on January 3, 2009, and the currency gained economic value on May 22, 2010, a date enshrined in Bitcoin lore as “Pizza Day,” when a Florida man paid someone in England 10,000 Bitcoins to order him two pizzas from Papa John’s. The pizzas cost about $25, setting the price of a Bitcoin at one fourth of a penny. (At press time those pizzas would be valued at $82,373,500.) With that, Bitcoin became like any other form of currency, a mass delusion: Its value derived from the belief that it had value.

In April 2013, around the time that Cotten appeared in Vancouver, the price of a Bitcoin had risen to $266. But it was not easy to buy or sell if you lacked technological sophistication and considerable patience. Seventy percent of the global Bitcoin trade was conducted through Mt. Gox, a Tokyo-based exchange, and had to be funded by sending a bank wire to Japan. Because Canadian banks wanted nothing to do with Bitcoin, users had to transfer funds through a series of intermediaries, bleeding transaction fees. “It was so hard to buy Bitcoin in Canada,” says Cotten in his unflappably peppy, inquisitive voice, in a 2014 interview. “You couldn’t hook up your bank account to anywhere. It was just such a challenge.”

In November 2013 Cotten and an older business partner, Michael Patryn, an authority on currency trading with passions for Brazilian jujitsu and luxury automobiles, incorporated the Quadriga coin exchange, or QuadrigaCX (named, for reasons that were not immediately clear, after the horse-drawn chariots of the Roman Empire). In a small, inefficient market, Quadriga swiftly distinguished itself. It was the cheapest exchange, the fastest, and, by all appearances, the safest—the first Bitcoin trading platform to hold a money-services business license from FinTRAC, Canada’s anti-money-laundering authority. Quadriga installed a Bitcoin ATM in its office, the second of its kind in Canada, and accepted gold by the ounce, which could be dropped off in person. Investing with Quadriga was even patriotic: “People like the fact we’re located in Canada,” Cotten told an interviewer, a point he often emphasized. “They know where their money is going.” Quadriga launched on Boxing Day.

Cotten’s efforts to win the trust of Bitcoin enthusiasts relied on his reputation in Vancouver, where he had become a director of the Bitcoin Co-op. He began to host the weekly meetups at Quadriga’s office. Quadriga sponsored local Bitcoin conventions and educational events, investments of $500 or $1,000 that yielded incalculable goodwill. Often Quadriga was the only Bitcoin company willing to pay for a sponsorship. “From our perspective, we needed Quadriga,” says Andrew Wagner, who at the time was the co-op’s director of public relations. “Without them, our events would have stopped. It put us in a particular place of need.”

Cotten’s generosity helped to compensate for a social aloofness that, despite his implacable cheerfulness, prevented him from developing close relationships. He seemed to prefer acquaintances over friends. “He was always smiling, really friendly, offering stuff,” says Alex Salkeld, a member of the original Vancouver Bitcoin circle. In January 2014 Salkeld posted a video on YouTube in which Cotten gently teaches his young daughters how to operate the Bitcoin ATM; Salkeld is certain that his two-year-old is the youngest person ever to have purchased Bitcoin. Cotten said he had a helicopter license and offered to take Salkeld on a ride. But he never did.

In February 2014, six weeks after Quadriga launched, Mt. Gox abruptly suspended operations, claiming that hackers had stolen $473 million from customer accounts. A year later, Canada’s largest exchange, CaVirTex, announced its closure, also blaming hackers; the second-largest exchange, Vault of Satoshi, closed the same week. Overnight, Quadriga became Canada’s dominant Bitcoin marketplace. The following year it launched a bid to be listed on the Canadian stock exchange, submitting to a full financial audit. “We’re excited,” said Cotten at the time, “to be able to provide an unparalleled level of transparency.”

Quadriga raised nearly C$850,000 in private capital, but Cotten ultimately abandoned the effort after a dispute with one of the major investors. Quadriga’s entire board resigned, leaving Cotten as Quadriga’s only full-time employee. Despite additional travails—a software glitch that lost C$14 million, a cease-trade order from the British Columbia Securities Commission after Cotten failed to file an audit, and CIBC’s seizure of C$21 million from one of its payment processors after the bank failed to determine its rightful owner—Quadriga profited wildly from Bitcoin’s giddy rise. In 2017, as the price of a Bitcoin shot to nearly $20,000, Quadriga processed nearly $2 billion in trades from 363,000 individual accounts. The exchange took a cut of every transaction.

Cotten’s reputation as a cryptocurrency true believer survived his death on December 9, 2018. Still, the eulogies had a prismatic quality; viewed from an angle they suggested darker possibilities. “He was not an evil dude,” said Freddie Heartline, a founder of the Bitcoin Co-op, when asked about the missing millions. “He was careful and pragmatic.” Another co-op member, Michael Yeung, rejecting the insinuation that Cotten had been out to make a quick buck, said “he was in it for the long haul.”

In February the Canadian Broadcast Company interviewed Michael Patryn. He was described as “an ex-business partner” who had “met Cotten online over five years ago.” “He was like a ray of sunshine,” Patryn told the interviewer. “The guy just always had a big goofy smile and laugh. He used to crack jokes all the time. He used to say he didn’t open up to many people, but he was able to open up to me.”

Asked for his location, Patryn said he was traveling between Thailand and Hong Kong.

“THEY WANTED REVENGE”

‘Everybody is a genius,” said Albert Einstein, and every Redditor is an Einstein. Unsolved crimes attract amateur detectives, who canvass the internet for clues. The amateur’s most valuable advantage is time. Law enforcement has the edge in nearly every other category: crime labs, informants, surveillance technology, forensic databases, the threat of arrest. When it came to the case of the missing Quadriga millions, however, the balance was reversed. About 76,000 individuals held accounts on Quadriga, and some of the most technically sophisticated of them were out hundreds of thousands of dollars or more. Much of Quadriga’s rise—and Bitcoin’s—had been fueled by speculation from greenhorns who had heard something exciting about cryptocurrency from their nephew or cable news. But just about every cryptocurrency expert in Canada had a Quadriga account. They had believed in Cotten and felt betrayed. They wanted answers. They wanted revenge.

Traditional law enforcement, meanwhile, had only the vaguest understanding of the subject. The Royal Canadian Mounted Police asked questions so rudimentary that they shocked the experts they interviewed. “It’s just completely out of their wheelhouse,” says a Quadriga creditor and cryptocurrency expert who was interviewed after publishing his findings online under the moniker QCXINT. “I spent a couple of hours on the phone explaining the basics to an RCMP investigator and came away feeling like he’d be much more comfortable with a dead body, a loaded gun, and a trail of blood.”

The court-appointed monitor, Ernst & Young, employed cryptocurrency experts but was roundly ridiculed for a string of blunders that began when, shortly after seizing control of Quadriga’s remaining funds, approximately $1 million was “inadvertently” transferred to one of the accounts that Cotten’s death rendered inaccessible. There were limits, furthermore, to the scope of the monitor’s investigation. Its object was not to track down every lost Bitcoin but to maximize the pot of money that could be returned to Quadriga’s creditors. (For months, Miller Thomson, the Bay Street law firm appointed to represent the class of creditors, received hundreds of emails a day inquiring about the lost funds, and answered such a constant barrage of phone calls—heartbreakers about lost pensions and college savings, babies crying in the background—that its lawyers could do little else.) Since the cost of Ernst & Young’s investigation is borne by the class, it made little sense to spend resources on highly speculative inquiries without assurance of success.

There was no such constraint on the outraged creditors—or the true believers who saw in Quadriga’s collapse an existential threat to cryptocurrency’s integrity at just the moment it had assumed an eggshell veneer of legitimacy. Bitcoin was founded on the principle that no individual or institution should be trusted. Every Bitcoin transaction appears in a public ledger—the blockchain—that can be consulted by anybody with internet access. Within hours of the announcement of Cotten’s death, a crowdsourced, scrupulously documented investigation, applying the logic and methodology of the blockchain, was afoot.

In the public narrative that emerged, derived largely from a meticulously detailed investigation by Canada’s Globe and Mail, Cotten fell sick nine days into his Indian honeymoon, shortly after checking into the Oberoi Rajvilas in Jaipur on December 8, 2018. He was driven to a private hospital and diagnosed with acute gastroenteritis. The following afternoon his condition deteriorated and blood tests indicated septic shock. Before doctors could stabilize him, his heart stopped; he was revived, and his heart stopped again. Barely more than 24 hours after the onset of a stomachache, he was pronounced dead.

The official cause of death was “complications from Crohn’s disease,” but the gastroenterologist who treated Cotten told the Globe and Mail that the death still haunted him. “We are not sure about the diagnosis,” he said. No autopsy was requested.

Confusion compounded confusion. The body was returned to the Oberoi and then sent out again to be embalmed; the embalmer refused to accept a body from a hotel, so Oberoi employees took it to a local medical college, where a staffer performed the procedure. The following afternoon Robertson returned with the body to Canada. She left behind a dozen teddy bears they had planned to deliver to the Jennifer Robertson and Gerald Cotten Home for Orphaned Children. (Robertson declined Vanity Fair’s request for an interview.)

A month passed before Robertson announced on Quadriga’s Facebook page that Cotten had died. During that time Quadriga continued to accept new funds but returned none. Creditors began to ask questions online about the authenticity of the formal documents in a country notorious for the ease at which falsified documents can be purchased, particularly after they learned that the death certificate misspelled Cotten’s name, and that the former chairman and managing director of the company that ran the hospital had been convicted of financial fraud two months earlier. It was also revealed that Cotten had written his will just four days before leaving for India. It detailed C$12 million in real estate holdings, the Lexus, the Cessna, and the Gulliver; it left C$100,000 for the care of their Chihuahuas. The will made no mention of the external hard drives, called cold wallets, in which Cotten had stored most of Quadriga’s funds.

This was the detail that most shocked cryptocurrency professionals. If Trust No One was the first principle of Bitcoin, the second was Have a Plan B, and the third was Have a Plan C. If you lose the keys to your house, you can call a locksmith; if you forget the password to your savings account, your bank will provide a new one. If you lose the private key to your cryptocurrency wallet—a long, randomly generated password, all but impossible to memorize—your funds are gone forever. The cautionary tales of fortunes lost because of misplaced private keys have the quality, in Bitcoin mythology, of the homilies delivered at religious gatherings.

“It just seemed so out of character for Gerry not to have any kind of backup plan,” says Michael Perklin, who started the world’s first blockchain security consultancy and had worked for CaVirTex. He befriended Cotten in 2016 in Toronto, where Cotten had moved during the effort to take Quadriga public. Cotten had declined to solicit Perklin’s services for Quadriga, but they worked beside each other at Decentral Toronto, a blockchain company that leased office space and served as the hub of the Toronto Bitcoin scene. “Gerry was a very careful person who well understood the need to back up one’s private keys. There’s no way that a man like Gerry, with all his knowledge and his mind-set, would leave it to chance.” When Perklin read that Cotten was the only person with the passwords to the company’s holdings and had made no contingency plan should he be unable to access them, whether because of incapacitation, kidnapping, or death, “my jaw kept on dropping to the point where it couldn’t have dropped anymore.”

Cotten himself warned of this danger during a 2014 interview. He claimed he wrote his passwords on paper and locked them in a safe deposit box at a bank, “because that’s the best way to keep coins secure.” Shortly before his death, according to two Quadriga associates, Cotten told close friends and family that Quadriga had a “dead man’s switch” that would send them access to the exchange’s funds in the case of his disappearance or death.

Some of the earliest findings by the Reddit sleuths were more prurient than incriminating. In leaked text messages sent before his death, Cotten bragged about his extravagances (“I’m still cleaning the mess from our fondue party we had on the weekend lol”); mentioned having a “safe bolted to the rafters in the attic”; joked about retiring soon; and referred to his honeymoon in scare quotes. All of it looked bad, but there was no confession of criminality. On his personal YouTube channel (account name “Gerryrulz”) he had posted several dozen homemade videos as infantile as they were portentous: Gerry incinerating a $20 bill in his microwave; Gerry knocking over a Jenga tower with a giant teddy bear; Gerry stuck in an amusement park maze, repeating the same mistakes, unable to escape. The Instagram account belonging to Jennifer Robertson showed that since 2016 she’d taken trips to Macchu Pichu, Dubai, Oman, Myanmar, the Maldives, and Rio de Janeiro, often in private jets. Robertson was also not her birth name; she had gone from her given name, Griffith, to Forgeron and then back, following an earlier marriage and its dissolution, before finally landing on Robertson in 2016.

The major break in the investigation was not a revelation, exactly, but something that had been hiding in plain sight. It concerned Quadriga’s cofounder. As it turned out, Michael Patryn—as Michael Perklin and nearly everyone in the close-knit Canadian cryptocurrency community had known for years—was not really Michael Patryn. Which meant that Cotten was not really who he said he was either.

GROWING PAINS
In the original account, Cotten fell sick nine days into his Indian honeymoon, shortly after checking into the Oberoi Rajvilas in Jaipur on December 8, 2018.


Illustration by Bianca Bagnarelli.

“IT WASN’T HIS FIRST RODEO”

Since Cotten’s death, an ongoing conversation about the Quadriga affair has been conducted on Telegram, an encrypted messaging application that resembles WhatsApp, only with heightened privacy measures. The chat group Quadriga Uncovered has nearly 500 members, many of them creditors who use the forum to discuss details of the claims process and share revelations and theories about the case. The chat is also frequented by journalists, detectives from the FBI and RCMP, and several of the targets of the ongoing criminal investigations, including Patryn, whose exact whereabouts have been unknown for about a year. In his comments—both in the group chat and in a private chat—he has minimized his involvement in Quadriga and declines to speak in detail about his past. But it was his past that, early on, became the focus of the Quadriga investigation.

Patryn had said that Cotten was “like a little brother to me.” This was how those who had known both of them saw it too, though the characterization usually wasn’t intended as a compliment. Patryn made people uncomfortable. He had seemed to appear in Vancouver out of thin air. At a time when the Bitcoin Co-op was a small group of crypto enthusiasts who met in each others’ apartments, Patryn wrote them an email out of the blue, expressing his support. They were excited. They usually did the outreaching; nobody had reached out to them before. Patryn came to the next meeting. Hi, he said. I’m Mike. I’m going to build a Bitcoin exchange. Let’s work together.

“It was weird,” says Joseph Weinberg, the founder and CEO of several digital currency businesses, who was then a college student and an early attendee of Bitcoin Co-op meetings. “It was quickly very clear that he wasn’t who he said he was. Sometimes he’d introduce himself as Michael from India. Sometimes he’d say he was Michael from Pakistan. Or Michael from Italy. But it came from a place of organization—he knew what he was doing. It wasn’t his first rodeo.” (Patryn denies saying that he came from other countries: “I’m not nationalistic.”)

Patryn was described as ostentatiously secretive—a trait not uncommon in cryptocurrency circles—and made vague allusions to a shadowy past and underworld connections. He was sturdy and muscular, with blackwork tattoos and a face that in repose seemed to glower. On Facebook he posed with a tiger, a lion, behind the wheel of a Lamborghini, straddling an ATV in a desert. Friends say he spoke of an emotionally absent father, manipulative family members, his obsessive-compulsive tendencies. He ranted about his hatred of scam artists, though his definition of the term seemed rather idiosyncratic—identity theft was a clean, bloodless business, but when you lied to someone’s face, it was unforgivable. He saw himself as an enforcer—of rules, of integrity, of loyalty. He seemed lonely.

One day he showed up with Cotten, who behaved like a runt little brother but, as one friend put it, “in a gross kind of way”—sycophantic, almost submissive. When Patryn told a stupid joke that nobody found funny, Cotten would burst into wild laughter. They were an odd pair.

Patryn told reporters after Cotten’s death that they had met online over five years ago, but this was about as accurate as calling himself an “adviser” to Quadriga when in fact he had been the cofounder. By painstakingly searching archived data from deleted websites, communicating on encrypted messaging services with anonymous sources, and analyzing public registration data, the Quadriga creditor who goes by the online moniker QCXINT, and a handful of other obsessives with handles like runbtc and Zerononcense, reconstructed the pair’s entangled online lives. They traced the relationship back to 2003, to a dingy warren of a website called TalkGold. It was devoted to high-yield investment programs, or HYIPs, more commonly known as Ponzi schemes.

Gerald Cotten may have had a sophisticated grasp of cryptocurrency, but his expertise—his formal training—lay in the art of the confidence game. TalkGold was a Ponzi clearinghouse, where blind faith and curdled cynicism engaged in a demonic rumba. Flickering banner ads for investments in precious metals and foreign exchange funds and “real offshore returns” buffered message boards offering something for everyone: scammers, marks, and those who belonged to both categories. There were forums promoting promising new HYIPs; scam warnings; advice on creating one’s own Ponzi, or how to get out early enough to profit; and offers of payment to boost fraudulent schemes on the site. (TalkGold was run by twins Edward and Brian Krassenstein until 2016, when agents from the Office of Homeland Security seized their files and froze their assets but never charged them with a crime. Subsequently the brothers would gain Twitter notoriety for their incessant attacks on Donald Trump before they were shut down for operating fake accounts and purchasing followers.) Patryn joined TalkGold on April 3, 2003, the year the site launched. In one of his first posts he boasted of earning 30 percent monthly returns in HYIP investments. Cotten opened his account three months later, shortly after his 15th birthday.

Both would become regulars on the message boards (“board whores”) and seek each other out on similar HYIP sites; Cotten averaged four posts a day on TalkGold alone. Patryn would tell friends that they’d first met in a con artist meet-cute, like the thieves in an Ernst Lubitsch film who fall in love while picking each other’s pockets. Cotten tried to scam Patryn; Patryn tried to counter-scam Cotten. Soon they were responding to each other’s public posts with inside jokes.

Cotten was a quick study. He began his own HYIP chat site by December, and on January 1, 2004—he was 15 and a half—he launched his first pyramid scheme, S&S Investments. It promised within “48 hours (usually within 18)” a return of “103% to 150%, possibly more.” In its prospectus, Cotten wrote:

“I’m afraid I’m not going to fill this section of the page with the usual bumph about how your returns are made. We do not invest in stocks, bonds, shares, precious metals or antiques. All I will say is that we will generate your return and that we are not what is called a ponzi or pyramid scheme.”

When S&S suspended operations three months later, taking most of its clients’ funds with it, Patryn took to TalkGold to defend Cotten’s integrity.

In isolation this might be written off as teenage hijinks—or at most light fraud. Patryn, though six years older than Cotten, was only 21. Both men soon graduated, however. In October 2004, TalkGold members began to debate whether Patryn might in fact be Omar Dhanani, one of 28 suspects who had been arrested by the U.S. Secret Service in a global sting operation targeting an online marketplace for stolen credit card information and forged documents. Dhanani, who was known on another message board as an expert in “washing” funds, was arrested in Southern California, where he was living with his family. Upon pleading guilty to conspiring to transfer stolen identification documents, he was sentenced to 18 months in federal prison. After his release in 2007, he was deported to Canada.

In a gambit of either flagrant carelessness or irrepressible egotism, Dhanani officially changed his name to the pseudonym he had used in his online criminal ventures, first to Omar Patryn and later to Michael Patryn. (“Many who were born without white privilege, including nearly every Chinese person I’ve met in Vancouver, has anglicized their name,” says Patryn. “I was one of five nonwhites working in capital markets in Vancouver.”) Patryn shortly resumed posting on TalkGold and other HYIP forums and opened a series of businesses that brokered digital currencies. The most successful of these was Midas Gold, incorporated in early 2008. It served as an independent payment processor for Liberty Reserve: a digital currency that was operated by an American in Costa Rica and used by drug cartels, human traffickers, child pornographers, and Ponzis to launder money. Midas Gold was an intermediary between Liberty Reserve and its traders, transferring cash into digital currency and back again, ensuring that no centralized record of clients existed. In its registration documents, Midas Gold listed as its contact gerald.cotten@gmail.com.

Cotten ran his own succession of schemes throughout those years, during which he also attended an undergraduate honors program at York University’s Schulich School of Business. In HYIP chat rooms, Cotten and Patryn defended each other against angry investors and posed as satisfied clients of each other’s various businesses; Patryn’s tended to be payment processors, Cotten’s were marginally more sophisticated iterations of S&S Investments. Their companies’ websites often shared registration information and were operated by the same computers. Around this time, Patryn changed the slug that appeared beneath his TalkGold posts to: “ ‘The definition of insanity is doing the same thing over and over and expecting different results.’ —Benjamin Franklin.”

On May 24, 2013, federal agents in 17 countries arrested Liberty Reserve’s administrators, shuttering its website and seizing its records and bank accounts. It was the largest online money-laundering case in American history: Liberty Reserve’s 5.5 million user accounts had conducted 78 million transactions worth more than $8 billion. “The global enforcement action we announce today is an important step toward reining in the ‘Wild West’ of illicit internet banking,” said Preet Bharara, then the U.S. attorney for the Southern District of New York. Midas Gold, which had begun to accept Bitcoin, was seized too.

By that point, however, a new Gerald Cotten venture was already six months old. The Quadriga Fund was an HYIP that claimed to invest in venture capital projects and foreign currency exchange markets; it could be funded with Liberty Reserve and Bitcoin, using payment processors operated by Patryn. A quadriga is a chariot yoked to four horses abreast. Quadriga Fund claimed to be operated by four (unnamed) investment managers. “Wealth is freedom,” read the prospectus. “When you invest with Quadriga, you remain in control.”

In October 2013, Cotten placed a job posting on an online forum, BlackHatWorld, that marketed frauds and stolen goods. He sought “a programmer who is familiar with Bitcoin” to develop a website that would serve as “an open market place, like a stock market, where people buy and sell Bitcoin.” The design had to be “simple, but professional” and it had to be built quickly.

Less than three months later, the Quadriga Fund was dead, and Quadriga CX went live.

“A REAL MOTHERFUCKER”

If Quadriga was conceived as a scam, what kind of scam was it? Most HYIPs, including those previously operated by Cotten, were exit scams: Ponzis that, after reaching a critical volume, abruptly close up shop. In some exits, the operator simply vanishes with the funds. More commonly, however, he will blame external forces (a meddlesome bank that freezes its accounts), provide fragmentary refunds, and equivocate until its investors give up hope. The delay tactic is more successful than might be expected, since customers of HYIPs understand, on some fundamental level, that promises of outsized returns are too good to be true; besides, there was always another outrageous bargain a few clicks away. The same blind faith that attracts the marks also drives them away.

Or perhaps Quadriga was to resemble Cotten and Patryn’s previous collaboration, Midas Gold—a service that enabled money laundering, taking percentages of each transaction. Quadriga’s corporate accounts did trade tens of millions of dollars worth of Bitcoin with accounts connected to known Ponzi schemes and illegal marketplaces. Some of the early visitors to the Vancouver Quadriga office even thought the exchange was just a show. “When you walked in, it was a very front-y feeling,” says Joseph Weinberg. “Four desks in a weird room, no business operations going on. It looked hollow.” Weinberg and several others who visited the office for Bitcoin meetups saw stacks of hundreds of payroll checks in the names of businesses that were not Quadriga, addressed to people who were not Quadriga employees. (In response to these allegations, Patryn denied the existence of check printing machines and pay stubs and suggested that visitors to the office were “confused by scanners and cash counters.”)

The ethical distinctions between the models may have been vanishingly subtle, but the logic of the con would predict its fate, and Cotten’s. Was Quadriga built to last, in other words, or built to self-destruct?

It was not built, in its early days, to make money. According to Quadriga’s last public filings in 2015, it operated in a deficit. Under the most charitable interpretation of Cotten’s actions, the public bid marks the moment that he decided to go straight. Perhaps—this scenario goes—Cotten believed that the cryptocurrency bull market would continue indefinitely, leading to higher trading volumes and profits; Cotten would have forced Patryn out, knowing that with intensified public scrutiny, his past would become a liability.

This would have been a startling about-face; in the early days, those who knew them believed that the company belonged to Patryn, with Cotten serving as a front man. “Michael was obviously running the show, but it was a very quiet running,” says Weinberg. “It seemed like they had an understanding, and shared motives. Gerald had a clean record, he could speak to the masses, while Michael operated the back end.” (Patryn: “I would say that the opposite is more accurate. Gerry and Alex [Hanin, a web developer] created and ran Quadriga, with Gerry running operations.”) By 2015, however, the same information that the TalkGold community had gleaned a decade earlier was starting to surface on Reddit: that Michael Patryn was really Omar Dhanani, a convicted thief and defrauder with ties to organized crime.

The whisper campaign likely began after Ryan Mueller, who conducted oversight for a third-party processor in Vancouver, was asked to review Quadriga’s application. After hearing that Patryn had been bragging all over Vancouver about his talent for laundering money, Mueller unearthed the connection to Dhanani. He rejected Quadriga’s application and forwarded his investigation to contacts in law enforcement. Nobody followed up with him. Mueller didn’t understand how a federal convict had been able to change his name, continue to operate, and escape charges. He figured that Dhanani had friends in the underworld and in federal law enforcement. “He’s what you’d call,” says Mueller, “a real motherfucker.”

Among those Mueller warned was Amber Scott, an anti-money-laundering expert at a compliance firm in Toronto called Outlier Solutions. She told clients and friends to avoid Quadriga. But when she met Cotten at the Toronto Bitcoin hub Decentral, she found him funny and sweet. She believed in him. She decided that his involvement might mean that Quadriga was legitimate after all. She appeared with him, and even introduced him, at conferences.

“There was a high tolerance for risk in the community, especially in 2015,” she says today. “We all want Bitcoin to succeed, and businesses in the Bitcoin industry to succeed, which encourages some level of self-delusion. There was also the fact that these were Canadian people, Canadian companies. We didn’t want to cast doubt on our own scene. While I warned people privately, I wasn’t shouting it from the rooftops. I don’t get to hold myself blameless.” Once, Cotten mentioned that his business partner was visiting Toronto and asked her to coffee. She froze and said something about having to shampoo her cats. Cotten flushed. He never mentioned Patryn in her presence again.

Patryn’s departure was followed by the departure of the rest of the board, which included Patryn’s fiancée, named Lovie Horner, and Anthony Milewski, a Patryn associate reportedly backed by Russian mining interests. “Gerry appeared to have taken full control,” says Andrew Wagner. “We thought, finally—Gerry is standing up to Mike. The little brother under the thumb finally grew some balls. That was our perception, at least.”

(Patryn has argued the reverse: that he quit Quadriga because he disagreed with Cotten’s decision to abandon the public listing. “Gerry stopped running the company legally and ethically from a filing standpoint after all of the employees, directors and officers left in January 2016,” he wrote recently. “We had no idea about the Ponzi aspect.”)

In the fall of 2016, Bitcoin began its wild rise. But it was too much too fast: The young, inexperienced cryptocurrency purist was overwhelmed, beset by coding errors, scrutiny from banks, incompetent contractors, and crooked payment processors. He had to resort to increasingly questionable practices in a desperate effort to salvage his dream. If you blur your eyes, this narrative—Gerry Tries to Make Good—nearly coheres.

“THEIR WALLETS WERE EMPTY”

Far more likely is the narrative of Gerry the Royal Fuckup. In this version of the story, scams beget scams and incompetence snowballs into recklessness and squander. The public bid was a last-ditch effort to salvage a flailing Ponzi, exploiting positive press and public sympathy to bilk money from investors. We now know that Cotten began, no later than 2015, to steal his clients’ funds. He also created dozens of false trading accounts to stimulate trading volume on the platform—a fact he even disclosed in the 2015 filings. He neglected to disclose, however, that he filled those fake accounts with invented funds, trading counterfeit Bitcoin for real Bitcoin and Canadian and American dollars. By the time of his death, Cotten’s sham trading accounts—which had names like Aretwo Deetwo and Seethree Peaohh—had conducted approximately 300,000 trades.

After the public bid failed, he kept no internal records—an almost inconceivable state of affairs for a company with an annual trading volume of more than $1 billion. In Ernst & Young’s phrase—one imagines its battalion of stern accountants in various shades of apoplexy—“typical segregation of duties and basic internal controls did not appear to exist.” Most years Cotten neglected to file a personal tax return. When he did file, he claimed no income from Quadriga.

Cotten provided withdrawals manually, seeming to give preference to the customers who complained loudest in public forums. He sent cash, in paper bags and shoeboxes, to coffee shops, laundromats, and pool halls. He also accepted cash deposits. A year before his death he sent a colleague a photograph taken in the kitchen of his Kelowna home. On the polished granite island are a vase of pink roses, the discarded lid of an ice cream carton, a copy of National Geographic, and dozens of dictionary-thick, rubber-banded stacks of Canadian currency in crisp 20s, 50s, and 100s.

Still Cotten was not directly responsible for all of his troubles. Because Canadian banks refused to accept cryptocurrency businesses as clients, Quadriga had to rely on third-party processors, which levied outrageous fees and in some cases stole funds outright. One Quadriga contractor claims today that the payment processor WB21, now the subject of federal lawsuits in the United States, Switzerland, and the United Kingdom, stole $14 million, and that another processor stole $5.8 million. (Patryn, Jennifer Robertson, and at least a couple of other Quadriga contractors each operated their own payment processing firms—a significant conflict of interest, though not illegal.) There was also the C$21 million seized by CIBC and the software glitch, which cost Quadriga C$14 million overnight.

Despite all this, Quadriga should have had about C$200 million of its customers’ funds in its cold wallets—the external hard drives, disconnected from the internet, that functioned like bank vaults. But within a month after Cotten’s reported death, blockchain investigators proved that nearly all of the inaccessible wallets were empty. Cotten, it turned out, had transferred the funds into personal accounts on competitor exchanges. At least some of those accounts had also been emptied. The operator of an exchange on which Cotten opened accounts told Ernst & Young that Cotten had squandered most of his holdings on reckless trades. On one particular margin account, he conducted 67,000 individual trades alone, placing enormous bets on fledgling currencies like Dogecoin, OmiseGO, and Zcash.

In 2014 Cotten spoke publicly of moving currencies between exchanges to take advantage of arbitrage opportunities. It may be that he traded Quadriga’s funds in a frantic effort to recoup the losses he had sustained. It was the behavior of a doomed gambler employing the martingale strategy, successively doubling down in a desperate effort to get back to zero, until he had dug a hole so deep that he could only be buried inside it. After he squandered what remained in Quadriga’s coffers, the price of Bitcoin plunged, and there was a run on the exchange. Then he flew to India, where things managed to get even worse.

“THE HONEYMOON”

There is yet another possibility, one that none of the case’s investigators is willing to discount. Call it the Mastermind Theory.

It begins with a few findings that do not fit neatly into the Royal Fuckup narrative. Cotten had mentioned having a safe bolted to the rafters in the attic of his home in which he had stored the passwords to his various cryptocurrency accounts. After learning of his death, one of his contractors immediately went to the house and searched for it. He found the place in the attic where four holes had been drilled through the rafters. But the safe was gone.

Eric Schletz, the pilot who brokered Cotten’s purchase of the Cessna 400, has described having seen Cotten walking through an airport with $50,000 in cash. There were rumors of other employees taking similar trips. Perhaps Cotten’s obsessive foreign travel—he boasted of having visited more than 50 countries without ever having “been searched by customs”—was inspired not by wanderlust but by strategy. In this way Cotten could have stowed away a fortune in foreign bank accounts in preparation for a grand exit.

What if the furious trading on other exchanges near the end of his life was not careless but calculated? This is a question that the lead investigator for the FBI’s cybercrime division, Jennifer Vander Veer, has posed to crypto experts. It is theoretically possible to conduct high-volume trades in such a way as to launder funds, provided that the trades are exotic enough to ensure that the losses accrue to another account that Cotten, or an associate, controls. Cotten’s trades were so bizarre, and so risky, that this seemed plausible—just as plausible, perhaps, as the idea that Cotten believed a series of Hail Mary bets on Zcash would come through.

The RCMP and the FBI have refused to comment, but some of their interview subjects have gotten the impression that they believe Cotten might not be dead. “They asked me about 20 times if he was alive,” says one witness who has intimate knowledge of Quadriga’s workings and has been questioned by both agencies. “They always end our conversations with that question.” QCXINT, the creditor and blockchain expert, said that the FBI’s Vander Veer told him that with hundreds of millions of dollars missing and no body, “it’s an open question.” The only way to verify that the body Robertson brought home from India was Cotten is to exhume it. The RCMP, which has jurisdiction over the case, has thus far not done so. (For his part, Patryn says he hasn’t “seen any reason to think that [Cotten] is alive.”)

Under the Mastermind Theory, Cotten ran Quadriga much as he had S&S Investments and its successors, honoring enough withdrawal requests to maintain credibility. The plan, from the beginning, would be to keep the con going as long as possible before vanishing with the money. After Bitcoin collapsed—and the withdrawal complaints turned into lawsuits, negative press, and the threat of a formal investigation—Cotten got married, wrote a will, flew to India for his “honeymoon,” and disappeared.

If the Mastermind Theory seems far-fetched, it’s worth pointing out that an exit scam can only succeed if it seems far-fetched. Cotten built his career on the insight that most people are willing to believe most of what they are told most of the time. Gerry the Mastermind would count on the world believing he was reckless, greedy, and dead. He would count on most people to forget all about him. Most people, a year after his death, already have.

In October, Robertson signed a settlement in the Quadriga bankruptcy case, agreeing to forfeit approximately C$12 million of assets to the creditor class. In a statement released by her lawyer, she said she had no knowledge of Cotten’s “improper” business practices and “was upset and disappointed” when she learned of them through the investigation. She expressed a desire to “move on with the next chapter of my life.” She may have to change her name one more time in order to do so.

If Gerry the Mastermind is alive, what is he doing? He would have new names and passports, perhaps a new face. He might still be collaborating with Patryn, or Patryn might be trying to track him down in a final act of Con vs. Con. Cotten may be hoping Robertson will join him once all the investigations have concluded, or she may be just another one of his victims. He might be living on a private island, or in Hong Kong, Thailand, or Monaco, traveling by yacht and helicopter and private jet. He might even be eating cheeseburgers and drinking beer. Gerry the Mastermind might think he will get away with it. And he will—as long as everyone else believes he hasn’t.

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