Choosing the Right Cryptocurrency Exchange

The announcement came after months of customer complaints about not being able to access their digital assets held by the exchange. The BCSC obtained the order after filing a petition to the British Columbia Supreme Court, stating the exchange’s founder Michael Ongun Gokturk could not be reached by regulators.

It was also announced that the Supreme Court of British Columbia has granted Grand Thornton LLP as the interim receiver of the Einstein Exchange’s assets. The BCSC also said in a statement that Grant Thornton had successfully entered and secured the premises that Einstein had been operating out of in downtown Vancouver. Grant Thornton had been previously given a court order authorizing them to forcibly enter the Einstein Exchange’s property if necessary.

The Einstein Exchange was incorporated and opened for business in December 2017. Michael Ongun Gokturk was the only director at the exchange. Einstein offered a platform to buy and sell cryptocurrencies such as Bitcoin, Ethereum as well as several altcoins.

A lawyer representing the Einstein Exchange said they plan to shut down operations within 30 to 60 days stemming from a lack of profit, adding that they have been attempting to sell the company’s assets to another provider. The BCSC reminded the public that it has not officially authorized any cryptocurrency trading platform to operate as an exchange and concluded by reminding investors to use caution when trading cryptocurrency.

The BCSC said that it had been investigating Einstein since May 2019 over concerns raised about the exchange being used to launder money and over allegations that their customers’ assets were being misused. It is estimated that Einstein owes its customers $16.3 million (in Canadian dollars), including $11 million worth of cryptocurrency and $5 million worth of cash.

Einstein’s implosion is now the second instance where a Canadian-based cryptocurrency exchange has had to halt operations in 2019. In January, Canada’s largest cryptocurrency exchange was forced to fold in the wake of Quadriga CEO Gerald Cotton’s death last September.

It has been reported that Cotton died unexpectedly from complications of Crohn’s disease while on his honeymoon in Jaipur, India. Cotton was just 30 years old at the time of his passing. In the wake of his unexpected death, Quadriga’s clients were left without a way to access the digital wallets that were thought to contain their crypto holdings. The only person to have the knowledge needed to access the private keys to open the digital wallets was Cotton. Quadriga had no plan, policies, or procedures in place in the event of Cotton’s untimely death.

In the Quadriga investigation, Ernst and Young gained access to five out of six digital wallets thought to be used by Cotton to hold his customers’ cryptocurrency. However, investigators uncovered that all of the accounts had been emptied by April 2018. Ernst & Young has reportedly recovered about $35 million from third-party payment processors (TPP) used by Cotton in the exchange’s operations. The firm was also able to recently recoup $12 million dollars in a voluntary settlement from Cotton’s widow Jennifer Robertson. In the settlement, Robertson agreed to surrender the inheritance she received from Cotton’s estate as well as the majority of her own financial assets to help pay back Quadriga’s clients.

In a statement regarding the settlement, Robertson says, “I have agreed to return QCX assets that I had previously thought were purchased with Gerry’s legitimately earned profits, salary and dividends”, adding “I was upset and disappointed with Gerry’s activities as uncovered by the investigation when I first learned of them, and continue to be as we conclude this settlement”.

During the investigation into Quadriga, it was discovered that Cotton had set up a number of fake accounts on his own exchange, often creating aliases with fraudulent balances. Ernst & Young claim that Cotton then used his fictitious accounts to buy legitimate cryptocurrency holdings from his users. It is also claimed that Cotton had been sending the stolen cryptocurrency to his own personal accounts held at other exchanges. In total, Ernst & Young is trying to recover over $200 million in assets owed to 115,000 Quadriga customers.

The events leading to the demise of the Einstein and Quadriga exchanges has left many investors in Canada feeling stressed and uncertain about the safety and security of their assets held on other legitimate Canadian cryptocurrency exchanges. In order for users to know if their assets are safe on a particular exchange, we have outlined several steps investors can take to help identify if the exchange of their choosing has the necessary safeguards, policies, and procedures in place to secure their digital assets.

When choosing the right exchange, we make several recommendations, including:

• Check to see if an exchange has a physical address and phone number where customers can communicate with the exchange’s staff.
• Call the exchange’s customer service department. When contacting customer service, take note of whether or not you are able to talk to a real person.
• Check with the exchange to see if they have an established working relationship or partnership with a traditional financial institution such as a bank that adds an extra level of security to the assets held by an exchange.
• Ask the exchange what steps and safeguards they have in place to secure clients’ assets.
• Inquire if an exchange has taken out insurance that can add an extra layer of security over the digital assets held in hot storage by an exchange. At Ndax, we keep 95-98 percent of assets in cold storage (storage that is not accessible by a computer and therefore is not likely to be attacked or hacked). The remaining 2-5 percent of assets held in hot storage (storage that is accessible by a computer) are partially covered by insurance. At Ndax, we keep the amount held in hot storage below the threshold of what is covered by insurance to ensure that our client’s assets are always sufficiently protected.
• Consider moving all of your cryptocurrency holdings to your own cold storage solution. Moving coins to cold storage can help customers identify an exchange’s liquidity and solvency situation.

If you are based in Canada and looking for a Canadian Bitcoin exchange, then take a look at  Ndax. Ndax is an easy-to-use, beginner-friendly exchange that can give you easy access to trade Bitcoin and other cryptocurrencies like Ethereum, XRP, Litecoin, Cardano, Dogecoin, EOS, and Stellar.