Following the death of the founder of Canadian digital currency platform QuadrigaCx, investigators at Canada’s biggest securities regulator dug into the mysterious case that had stranded more than $180 million of investor funds.
What they found was an old-fashioned fraud wrapped in a new technology, according to a 33-page report made public Thursday.
The Ontario Securities Commission, which investigated alongside an RCMP probe, concluded that Gerald Cotten, who died during a trip to India in 2018, carried out the fraud by himself.
“Staff determined that Quadriga collapsed due to a fraud committed by Cotten,” the OSC said, adding that he had opened accounts under aliases and credited himself with fictitious currency and crypto-asset balances, which he then traded with unsuspecting Quadriga clients.
When he died, the 30-year-old founder of the cryptocurrency platform – from Fall River, Nova Scotia – was also the only one with access to the keys, or passwords, to the digital wallets of more than 100,000 investors. Those wallets were supposed to hold their crypto assets, and the investors have been pressing since Cotten’s death to find a way to access their investments.
But what the OSC revealed Thursday is that their money was largely gone two years before Cotten died — lost to unsuccessful trades in cryptocurrencies including Bitcoin and Ether or taken by Cotten to fund a “lavish” lifestyle.
By 2016, Quadriga had morphed into what was more or less a Ponzi scheme, the regulator says, with new investor funds being used to pay out old investors who made withdrawal requests.
“Cotten sustained real losses when the price of crypto assets changed, thereby creating a shortfall in assets available to satisfy client withdrawals,” the OSC explained, adding that he “covered this shortfall with other clients’ deposits – in effect, operating a Ponzi scheme.”
Most client losses fraud-related
The OSC calculated that the bulk of the $169 million in client losses – approximately $115 million – arose from Cotten’s fraudulent trading.
An additional $28 million was lost to trading on other platforms.
“Staff also determined that Cotten misappropriated millions in client assets to fund his lavish lifestyle,” the regulator said Thursday.
His widow, Jennifer Robinson, said in legal filings that she had received threats.
Quadriga filed for protection from creditors in February of 2019, and entered bankruptcy proceedings a couple of months later. Ernst & Young is the trustee in bankruptcy.
The OSC report said Quadriga was “already in crisis before Cotten’s death, and most likely would have collapsed even if Cotten had lived.”
When he died in December of 2018, the crypto platform owed about $215 million to clients but had almost no assets to cover these liabilities.
“By November 2016, Cotten had injected so many fake assets into the platform that its eventual insolvency was all but assured,” the regulator concluded.
Ernst & Young, the bankruptcy trustee, was able to recover $46 million in assets to pay out to clients, according to the report.
With Cotten dead and the company in bankruptcy, the OSC determined it was not “in the public interest” to bring an enforcement action in the case. But the regulator still wanted to tell investors and the public what happened.
“In this case, our mandate is best fulfilled by sharing enforcement staff’s findings publicly,” the regulator said.
“While public release of a report of this nature is rarely done, we believe that making this review of the facts widely available may help prevent this type of situation from recurring.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
