HALIFAX — Software engineer Tong Zou lost his life savings — more than $500,000 — in the QuadrigaCX cryptocurrency meltdown.
The mild-mannered 30-year-old Vancouver resident wasn’t making any clandestine, high-stakes trades when the online platform was shut down on Jan. 28 amid a storm of controversy and conspiracy rumours.
Instead, Zou was simply looking for an easy way to transfer U.S. funds into Canada for a down payment on a local property.
“It’s kinda devastating when you do lose that kind of money,” Zou said in an interview, adding that he still believes the future remains bright for cryptocurrency markets.
“But this is a bad mark on the Canadian crypto industry.”
The QuadrigaCX collapse has shone a spotlight on a dark corner of an unregulated industry that tends to attract people who are suspicious of traditional banks and prefer the anonymous, decentralized nature of the murky crypto-coin world.
But it has also revealed that some crypto users were burned while conducting the most mundane of tasks.
Zou says he and some of his friends racked up some healthy profits in 2017 when cryptocurrency markets were red hot.
“But we lost it all in 2018 because of the crypto crash,” he says matter-of-factly. “I know a few people who got out at the right time, but that wasn’t me.”
As for Vancouver-based QuadrigaCX, Zou admits he chose to move his money through the virtual company in September 2018 because it offered a 10-per-cent premium.
“If there’s any lesson I learned, it’s to not to be too greedy,” he says. “And that’s what caused me to be in this situation. I saw the 10-per-cent premium. I got tempted by it.”
By cryptocurrency standards, QuadrigaCX was a relatively well-known exchange, mainly because it was one of the first in Canada. Co-founded by Canadian Gerald Cotten in 2013, the exchange appeared to be a safe bet.
By last fall, however, QuadrigaCX users were complaining that it was taking longer than usual to withdraw funds. Zou was aware of the time lag, but that red flag wasn’t big enough.
Then the bottom fell out — though not all at once.
Cotten, the company’s 30-year-old CEO and sole director, was travelling in Jaipur, India, on Dec. 9 when he died from complications caused by Crohn’s disease, a chronic ailment that causes inflammation of the bowels.
When his death was publicly announced more than a month later, court documents revealed Cotten was the only QuadrigaCX employee who knew the encrypted pass codes required to gain access to so-called cold wallets holding $190 million in Bitcoins and other cryptocurrencies.
As well, the company confirmed 115,000 users were owed another $70 million in cash, much of which remains tied up in bank drafts held by third-party payment processors.
The Nova Scotia Supreme Court granted QuadrigaCX temporary protection from its creditors on Feb. 5. A court-appointed monitor is searching for the missing money. The company could be sold.
“Yes, it’s unregulated and you’re taking a risk, but … I thought it was reasonably trustworthy at the time,” says Zou. “It turned out to be the worst time to do it.”
Zou says he’s been in touch with other QuadrigaCX customers by using the Reddit and Telegram social media sites, and he is following the insolvency process playing out in a courtroom in Halifax, where Cotten lived.
The wild rumours and innuendo that have dominated online discussions has led Zou to conclude: “It’s all kind of really suspicious.”
Meanwhile, he and many others owed money have been conducting their own online sleuthing to figure out where their money went.
There’s no shortage of theories about QuadrigaCX’s downfall.
Giuseppe Burtini, a cryptocurrency expert from Kelowna, B.C., filed an affidavit with the court last week, saying he represents an unnamed company that sold crypto-coins on the QuadrigaCX platform and is owed a “multimillion-dollar” balance.
Burtini said the company had been trying to retrieve money from QuadrigaCX since February 2018, but received only a partial payment.
“The … company will be unable to access its significant fiat currency balance for an indeterminate period of time and I am concerned that it may not ever receive that balance in full,” his statement says.
Court documents show that in January 2018, CIBC froze the accounts for a third-party payment processor known as Costodian, preventing QuadrigaCX from getting at more than $25 million. That matter has yet to be resolved.
Burtini’s affidavit says he wants to be appointed to a court-appointed users steering committee, which will advise lawyers pursuing the case. A computer expert with a master’s degree in science from the University of British Columbia, Burtini said he has the skills and tools to help find the missing currency.
Ryan Kneer, a Calgary-based QuadrigaCX user, filed an affidavit saying he had used the platform almost daily for the past two years.
Like Burtini, he did not reveal how much he is owed, saying privacy is something cherished by cryptocurrency traders.
“Among other reasons for protecting their privacy, individuals who own large quantities of cryptocurrencies have been targeted for theft, phishing and even assault,” the statement says.
Kneer describes himself as a professional market maker involved in the cryptocurrency scene since 2013, having developed automated trading software.
“I believe that, philosophically, many affected users are skeptical of traditional institutions. Many people choose to use cryptocurrencies because of dissatisfaction with the existing financial system.”
As for Zou’s next steps, he says he will recover from his losses — though it could take a long time.
“I was angry and depressed when it first happened, but over time I was talking to my friends and family to get some sense of comfort and support,” he says.
“The way I got over it is by thinking about what’s important in my life — what makes me happy. Having enough money to make me comfortable — that’s all good. But having friends, family and being around the people that you care about, I think that’s more important than money.”
Michael MacDonald, The Canadian Press
B.C. tanker-ban bill squeaks through final vote in Senate
OTTAWA — Legislation barring oil tankers from loading at ports on the northern coast of British Columbia slipped over its final hurdle in the Senate Thursday, despite last-minute attempts by Conservative senators to convince their colleagues to kill it.
Bill C-48 is one of two government bills Conservatives in both the House of Commons and the Senate say are kneecapping Alberta’s oil industry by limiting the movement of its oil. It passed the Senate by a vote of 49 to 46.
The tanker ban and Bill C-69, an overhaul of federal environmental assessments of major construction projects, have together become a flashpoint between the Liberals and Conservatives over how Canada can protect the environment without driving investment away from the fossil-fuel sector.
C-69 imposes more requirements for consulting affected Indigenous communities, widens public participation in the review process and requires climate change to be considered when major national resource-exploitation and transportation projects are being evaluated. It applies to a wide range of projects including interprovincial pipelines, highways, mines and power links.
C-69 was set for its final dance in the upper chamber late Thursday evening. The Senate made more than 200 amendments to that bill earlier this month but the government accepted only 99 of them, mostly to do with reducing ministerial discretion to intervene in the review process.
The unelected Senate has generally bowed to the will of the elected House of Commons when there is a dispute between the two parliamentary chambers about legislation.
The bills, both expected to be fodder for Liberals and Conservatives on the campaign trail to this fall’s election, were on a long list of legislation the Senate pounded through as it prepared to rise for the summer.
The House of Commons called it quits earlier Thursday. The House closed after MPs delivered condolence speeches following the death of Conservative MP Mark Warawa, forgoing the rest of the day’s planned activities out of respect for the veteran MP who died of cancer.
Bill C-48 imposes a moratorium on oil tankers north of Vancouver Island, but after the government accepted an amendment from the Senate, it will now undergo a mandatory review in five years.
The Senate committee that reviewed the bill recommended in May the entire Senate vote down the bill in its entirety, but that didn’t happen, leading Conservatives to accuse the Independent senators who make up a majority in the chamber of being Liberals in disguise.
Conservative Sen. Michael MacDonald was one of a few from his caucus to make final pleas with his colleagues to not proceed with the bill.
He said it “will be devastating for the Alberta and Saskatchewan economies.”
However several Independent senators rose to speak in favour of the bill, including Yukon Independent Sen. Pat Duncan.
“I believe we should be doing it,” said Duncan.
Ontario Sen. Donna Dasko, who was on the committee that studied the bill in the Senate, said she thinks “it is quite a good bill.”
“This bill does not actually ban tankers from the Hecate Strait; it simply landlocks Alberta and Saskatchewan oil, and destroys the possibility of economic development in northern Indigenous communities,” said Conservative Sen. Dennis Patterson, a former premier of the Northwest Territories, after the Senate passed it.
Mia Rabson, The Canadian Press
Monument to Canada’s war in Afghanistan gets a home after years of bickering
OTTAWA — A site has been officially approved for the federal government’s promised national monument for the war in Afghanistan, five years after the memorial was first promised.
The decision by the National Capital Commission on Thursday ends years of bickering over where the memorial should be located and paves the way for it to be built east of the Canadian War Museum in downtown Ottawa.
The national monument is separate from the memorial to soldiers who died in Afghanistan, whose unveiling at the Canadian Forces’ new headquarters building last month prompted an outcry.
The national monument was first promised by the previous Conservative government in May 2014 following the end of Canada’s 13-year mission in Afghanistan.
But while work was to be finished by 2017, the construction timeline became derailed by complaints over the government’s chosen location at Richmond Landing, near the Royal Canadian Navy Monument along the Ottawa River.
Among the concerns was the site was isolated and difficult to reach, particularly in winter and for veterans with accessibility challenges.
Members of the veterans’ community instead overwhelmingly backed a different location to the immediate west of the war museum, which was one of four sites proposed by Veterans Affairs.
But the war museum and its architect, Raymond Moriyama, opposed that site, saying the institution intentionally avoids emphasizing any one conflict and that the memorial would detract from the building’s design.
The approved location is across the street from the museum and behind the National Holocaust Monument. Design work is expected to start in the coming months, with the memorial’s unveiling now scheduled for fall 2023.
Retired major Mark Campbell, who lost both legs while serving in Afghanistan, welcomed news that officials had approved a location. He said the monument “has been in limbo far too long.”
The NCC’s decision follows an uproar last month over the way a memorial erected by Canadian soldiers in Kandahar during the Afghan war was unveiled at the Department of National Defence’s new headquarters building under what some alleged was a veil of secrecy.
The monument, with shiny black plaques featuring each of Canada’s military and civilian war dead, stood for years at Kandahar Airfield in southern Afghanistan. It was moved to Canada after the combat mission ended in 2011.
Campbell understood the anger veterans and the families of soldiers killed in Afghanistan felt after being excluded from the Kandahar memorial’s unveiling, and welcomed their being allowed to visit it.
But, he added, “people were of the mistaken perception that that was in fact the national Afghanistan War memorial or monument, and it’s not.
“It was a form of remembrance, a concrete form of remembrance, created by soldiers for soldiers. And the current location may not be ideal, but this is not the national monument we’re talking about. This was a monument created by soldiers for soldiers and families.”
Veterans Affairs Minister Lawrence MacAulay in a statement said the new location offered “an accessible and fitting place to quietly reflect and honour the courage, sacrifices and achievements of those who served during our country’s mission in Afghanistan.”
More than 40,000 Canadians served in Afghanistan between 2001 and 2014. More than 160 were killed while thousands were left with physical and psychological injuries and trauma.
—Follow @leeberthiaume on Twitter.
Lee Berthiaume, The Canadian Press
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