The trustee in bankruptcy for defunct cryptocurrency platform QuadrigaCX says it is investigating the “unauthorized transfers” of approximately 100 bitcoins currently worth more than $2 million from a number of so-called “cold wallets” it had been unable to access for three years.

Ernst & Young Inc. said the cryptocurrency was inaccessible during the bankruptcy proceedings in 2019 because Quadriga had “inadvertently” transferred some cryptocurrency into wallets that could be accessed only with private keys, which could not be located. At the time, the cryptocurrency was worth more than $400,000.

“The locked bitcoin remained within the Quadriga cold wallets until December 16, 2022, prior to the unauthorized transfers being initiated,” E&Y said, adding that it did not initiate the transfers last week.

The firm said it began working with the court-appointed representative counsel in the case, Miller Thomson, to investigate after becoming aware of the “unauthorized movement of bitcoin.”

Theories swirled around the reasons for Quadriga’s collapse after founder Gerald Cotten — the only one with access to the keys, or passwords, to digital wallets of more than 100,000 investors — was reported to have died during a trip to India in late 2018.

The Ontario Securities Commission did an extensive investigation into Quadriga’s collapse, and reported its findings in mid-2020, concluding that investor 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.

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The regulator said Quadriga had morphed into what was more or less a Ponzi scheme by 2016, with new investor funds used to pay out old clients who made withdrawal requests.

The OSC, which investigated alongside the Royal Canadian Mounted Police, said Quadriga collapsed as a result of an old-fashioned fraud wrapped in a new technology. The securities regulator also concluded that Cotten, who was 30 when he died abroad while travelling with his wife, had acted alone. 

In the detailed report, the OSC said he had opened accounts under aliases and credited himself with fictitious currency and crypto asset balances, which he then traded with unsuspecting Quadriga clients.

A spokesperson for the OSC said he was unable to comment on whether the market watchdog is now looking into the unauthorized transfers of Bitcoin from Quadriga wallets.

“We cannot confirm or comment on the existence, status or nature of any complaint, review or investigation,” JP Vecsi said in an emailed statement.

“This is to protect the integrity of investigations, to ensure the complaint process is not used to affect the market, and to promote fairness towards those who are the subject of investigations.”