Mystery Tale
New Documents Link QuadrigaCX Founders to Liberty Reserve Money Laundering Operation

New information suggests that the cofounders of QuadrigaCX, a Canadian exchange that collapsed earlier this year under still-hazy circumstances, had previously worked together running an intermediary for Liberty Reserve. Liberty Reserve was a centralized digital currency that was shut down by U.S. law enforcement in 2013.

The new evidence linking QuadrigaCX to Liberty Reserve came in court documents released in connection with Quadriga’s unwinding (the exchange officially entered bankruptcy yesterday). As detailed by independent journalist Amy Castor, an email address apparently belonging to Cotten appears alongside the name Michael Patryn in records for Midas Gold, an intermediary that sold Liberty Reserve’s digital currency. Patryn founded Midas Gold in 2008, but it’s unclear when Cotten may have become involved.

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Liberty Reserve was shut down by federal authorities, and its founder went to prison for money laundering. The system appears to have been used extensively by criminals to hide or move ill-gotten gains, and Cotten and/or Patryn appear to have processed millions of dollars worth of Liberty Reserve credits through Midas Gold, making nice profits along the way. The Midas Gold website,, was among many intermediaries seized alongside the shutdown of Liberty Reserve itself, and Patryn and Cotten cofounded QuadrigaCX, according to Castor, just a few months later.

What does this mean? On its own, less than it might appear. The collapse of QuadrigaCX has generated widespread speculation about intentional wrongdoing by Cotten and others, initially fueled by the suspicious circumstances of Cotten’s death in India just before the exchange imploded. Much as in cases like the Fyre Festival and Theranos, much of the fascination around the case comes from a simple question: Did QuadrigaCX collapse thanks to simple incompetence, or were its founders planning an “exit scam” from the start?

The link to Liberty Reserve feels like it adds to a picture of Patryn and Cotten as malicious criminals, but such a judgment would be a mistake. Centralized digital currencies like Liberty Reserve and E-Gold were primitive precursors to bitcoin, and many who went on to become reputable figures in the cryptocurrency world were interested observers and even users of such systems. Running an intermediary like Midas Gold could simply reflect that Cotten and Patryn had an early belief in the importance and usefulness of digital cash (and, certainly, saw a way to make money).

The one known criminal in the Quadriga saga appears to have wanted the operation to be above-board, and left when it took a turn to the dark side.

However, other information that has emerged since Quadriga’s collapse provides significantly more reason to question the good intentions of Quadriga’s founders. In early March, documents unearthed by the Globe and Mail alleged that Michael Patryn was formerly known as Omar Dhanani, the name under which he had been prosecuted and done prison time for identity theft and other crimes (Dhanani has denied being Patryn). Later in March, regulatory attorney Christine Duhaime, who briefly worked for the exchange, detailed Quadriga’s aggressive turn away from responsible operating procedures, towards a drastic reduction of oversight and concentration of power with Cotten.

The question of intent likely matters more for public onlookers than people owed money in Quadriga’s bankruptcy process. The money to make the latter whole may not be any easier to find if Cotten and Patryn were hapless screwups than criminal masterminds. It might matter most of all for Patryn/Dhanani, who, according to his LinkedIn page is still working in the cryptocurrency space. At least under U.S. law, the statute of limitations on money laundering is five years.

But even Patryn’s role doesn’t seem to clarify the question of moral intent. Patryn has claimed to Bloomberg that he had no involvement with Quadriga after splitting with Cotten more than three years before Quadriga’s collapse and Cotten’s death. Patryn says he disagreed with Cotten’s decision to halt the public listing process for the firm—exactly the decision that, according to Duhaime’s account, put an end to responsible accounting and oversight procedures.

In other words, the one known criminal in the Quadriga saga appears to have wanted the operation to be above-board, and left when it took a turn to the dark side.

(A note: Amy Castor has done a great deal of helpful work following the QuadrigaCX story, including assembling this epic timeline. You can support her on Patreon).