Cryptocurrency Mystery: How Did $140 Million Disappear?
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whelan at The Wall Street Journal in New York. Can $140 million disappear into thin air? It can if the only person with a password to access the money dies and takes the password information to his grave. That's what many people believe happened at a Canadian cryptocurrency exchange. We'll have the details in a moment. First, these money and market stories you should know. A pay gap has emerged among graduates of MBA programs. A new study indicates that going into MBA programs, white students earned an average salary of $71,294, while minorities surveyed earned 24% less at $57,640. Upon graduation, that pay gap narrowed to 16%. with minorities earning $101,505 on average to their white counterparts' average of $117,834.
Now, 900 men and women were surveyed who earned their degrees between 2005 and 2017.
How did QuadrigaCX claim $140 million of customer funds became inaccessible?
The students who identified as black, Hispanic, or Native American received a bigger pay increase upon graduation, averaging a 76% salary gain. Their non-minority peers' salaries rose by an average 65%. But the study points out the gains come on top of unequal pay, leading a pay gap. And Tesla cut the price of its mass-market Model 3 sedan to $42,900. That's about an $1,100 reduction, and it's the second price drop this year. It's also another step in CEO Elon Musk's quest to drive the price, not including tax credits and fuel savings. down to $35,000. The Journal's Robert Wall reports the Model 3 is actually facing an effective price increase in the U.S. this year as the government gradually eliminates a $7,500 tax credit for the purchase of electric vehicles.
For Tesla buyers, that credit fell to $3,750 on January 1st, and it'll be cut in half again on July 1st before phasing out by year-end.
What is the difference between cold wallets and hot wallets in crypto custody?
There's a lot of mystery surrounding Bitcoin and cryptocurrency, but here's something that takes mystery to a new level. $140 million stuck in a vault, or just plain old missing. How could that much money fall off the radar? Wall Street Journal cryptocurrency reporter Paul Vigna is just the man to come by with some answers for us, and he's here in our studio. So Paul, a Canadian cryptocurrency exchange reports the money missing, and it had to do with the death of the exchange's founder?
Yes. And look, there is a lot we still don't know. There is a lot that is is yet to be confirmed and figured out. And there are a lot of different ways that this story could go. And we are following it. So that said, a 30 year old Canadian named Gerald Cotton. was running a Canadian cryptocurrency exchange called Quadrica CX. He apparently died in India in December. So the company had been having a lot of a lot of money problems since going back to last January, last January. In January 2019, they finally final they file for bankruptcy court protection. And what comes out is that Cotton was running the entire exchange from a laptop in his home. He was most of the customer money was held in what the what in the Bitcoin industry they call a cold wallet.
It's basically just an account that is kept that is more or less kept offline.
You mentioned that in the story. Coldwall is an offline place to hold information?
Well, yeah. Yeah, right. The information about customer balances.
How do private and public keys control access to Bitcoin wallets?
And a hot wallet is connected to the Internet directly.
Yes. And the way it kind of works is they'll have, you know, look, if you're a customer, you send money to them on your behalf. You know, you want to trade with them. You want to use their exchange for trading.
Right.
You will send your money to what they call a hot wallet. It's just an account. Think of it as an account. So the company will have, you know, they may have more than one of each kind, but basically they have what's called a hot wallet, which is an account that they will use for all the sort of daily operations of the company. Right. Money's coming in. Money's moving out. Everything will go through the hot wallet. So the cold wallet is where is a reserve, is where they will keep the bulk of their holdings. You keep it offline. You keep it in storage somewhere.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:05–1:08
2
How did QuadrigaCX claim $140 million of customer funds became inaccessible?
1:08–2:20
3
What is the difference between cold wallets and hot wallets in crypto custody?
2:20–4:05
4
How do private and public keys control access to Bitcoin wallets?
4:05–4:55
5
Why do investigators suspect Gerald Cotten took the private key to his grave?
4:55–6:52
6
What did blockchain forensics reveal about QuadrigaCX’s reported cold wallets?
6:52–9:17
7
How much of QuadrigaCX’s obligations were crypto versus cash and why was cash inaccessible?
9:17–13:08
8
What lessons does the QuadrigaCX case teach about exchange regulation and due diligence?
13:08–13:18
Speakers
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