November 3, 2021 • 58 mins
At the height of its success, Canada's QuadrigaCX was the largest cryptocurrency exchange in the country, perfectly positioned to ride the booming mainstream interest in Bitcoin and altcoins. On the backend, the operation was largely run by a single man: Gerald William Cotten. Yet there was more to the story; facts that, once revealed, indicated Quadriga was a Ponzi scheme. As the authorities closed in, Cotten took a trip to India in Decamber of 2018, where he suddenly passed away, taking with him access to millions of dollars in crypto. At least, that's the official narrative -- you see, many people seem convinced, to this day, that Gerald Cotten never actually died.
Learn more about your ad-choices at https://www.iheartpodcastnetwork.com
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
From UFOs to psychic powers and government conspiracies. History is
riddled with unexplained events. You can turn back now or
learn the stuff they don't want you to know. A
production of I Heart Radio. Hello, and welcome back to
(00:25):
the show. My name is Matt, my name is Noel.
They called me Ben. We're joined as always with our
superproducer Paul Mission controlled decond. Most importantly, you are you.
You are here, and that makes this the stuff they
don't want you to know. Cryptocurrency, conspiracy, corruption, crime, and
(00:46):
cotton but not spelled the way you would think. That's
what today's episode is about. It comes to us courtesy
of a fellow conspiracy realist, Chris, who wrote to us Chris,
if you recall in a earlier Listener mail segment, and
Is had asked us more about the strange story of
the officially late crypto multimillionaire Gerald William Cotton or Jerry
(01:10):
with a G to his friends. What follows is a
series of strange, interconnected conspiracies hindering on I mean hindering
on scams, greed and griffs, but just possibly hindering on
the concept of pseudo side. Uh. We've got a lot
of stuff to unravel here. We may not get to
(01:32):
it all, but we are excited to dive in with you.
So here are the facts. Who was a young, young
dude at the at the height of his achievements. He
was born May eleven in Canada. Yeah, I mean it
seems pretty typical for you know, burgeoning uh kind of
boy geniuses in this crypto space. You know, it's sort
(01:54):
of like a almost become like a meme or a
bit of of a parody. But yeah, he was born
Gerald William on May eleventh of nineteen eight in Canada. Um.
His official death day was December nine, two th eighteen,
meaning that he would have been a thirty years old.
A fifth story is to be believed in Cotton lived
(02:15):
in Old Belleville, Ontario, before he headed on down to
business school at York University in Toronto, and uh he
graduated there in two thousand and ten. He had a
bachelor's degree in business administration. So you know, he's on
his way up to to have a legit job making
tons and tons of money. I think he already had
(02:38):
a job, but we'll we'll get to you. He definitely did.
He had a side hustle, yeah, or maybe college was
the side hustle unclear, but I have opinions there is
an interesting gap in Cotton's timeline from here's what we know. Um,
he was very busy, as as you and I just
(03:01):
eluded Matt uh both during his higher education, probably before
and uh. By the end of ten he had relocated
to Vancouver and he had started what would become for
a very brief time, a massively successful company. If you're
(03:21):
not in if you're not one of the people who
reads about cryptocurrency, cryptocurrency, in bitcoin and so on, you
might not have heard of Cotton before I Flicks documentary
drops next year. But if you are from familiar with
the world of cryptocurrency, you know a little bit about
his professional past, which is edging into legend at this point. Anyhow,
(03:45):
he founds this outfit called Quadriga Fintech Solutions with a
business partner. Yeah, not the not the most um, not
the most smooth name. But his business partner is going
by the name my called patron. Will explain what we
mean by that a little later. I gotta I gotta ask,
I mean, is this the kind of thinking name of
your company to make it sound like a big, massive
(04:08):
you know, biotech firm when it's all kind of really
just smoking mirrors, or is there something behind these kind
of imaginary sounding words like quadriga and fintech. Fintech is
quadriga is? I think it is a kind of So
I was looking this up, and I was trying to
figure out if I could, if I could find some
(04:30):
clear evidence of why they named it this way. But
a quadriga is a real thing. It's a chariot that's
drawn by four horses. It was used and they're all
in one straight line. It was used for chariot racing
in the Roman Empire, like some ben hur type stuff. Yeah.
According to a Vanity Fair article, the that quadriga, the
(04:52):
four person chariot was used because there were four people
who basically controlled the funds that flowed into and out
of this exchange which we're going to tell you about,
which which will figure into the story a bit later.
The specificity right, the specificity of right, and you can't
recommend enough that article matches cited Ponzi schemes. Private Yachts
(05:17):
won't give you the whole title, but it's the strange
tale of Quadriga by a journalists named Nathaniel Rich, I
was not able to independently, like discover exactly why they, uh,
these two guys that we know of named it that.
But Quadriga is a real thing. And then also Rich
(05:38):
seems pretty convinced that it was named for the idea
of these four individuals powering it. So so it's it's
weird because Quadriga itself is not really not so much
the subject of the action here. It's the operator of
what's called a cryptocurrency exchange, one's called Quadrigua c X,
(06:02):
which over the course of a few years, just a
few would go on to become the largest cryptocurrency exchange
in the entirety of Canada. Uh that this is where
we see I think one of the first plot wrinkles,
and I know everybody clocked it here too. You can't
start one of these without something to financially prime the pump.
(06:23):
So the big question is where did Patron and Cotton
get there, get their seed money to begin with? How
did they start the exchange. That's a question we can
speculate at. We can speculate at later, but for now,
just keep that in the front of your mind. Somehow,
these two guys who have interesting past that the customers
(06:45):
of Quadrigue are not aware of. Somehow they managed to
start this thing that automatically blows up. And why does
it blow up? A lot of it goes down to
timing and culture. I think we can say that a certainty. Yeah,
and in I mean, a crypto exchange is literally what
it sounds like. It's like, you know, where you can
(07:07):
convert one type. You know, first of all, you can
buy cryptocurrency using American dollars or euros or in this
case Canadian um currency. Uh. And then once you've done that,
you'll say you you take your initial you know, um
fiat currency and invested in bitcoin or whatever. You can
then exchange that currency into any number of hundreds of
(07:30):
other currencies and usually it get It lends these these
coins more legitimacy when they end up on a prominent exchange.
So like some of these fly by night current cryptocurrencies,
they won't be on the big exchanges um. And if
they do, it makes big news and oftentimes that in
and of itself can move the price. You know, oh shiba,
a new coin is now all of a sudden on
(07:51):
crypto dot com, and that can really balloon the price
of a coin like that. We're probably gonna get into
this later bit I'm assuming, but this exchange, Quadriga Exchange,
actually used tokens as a system of exchange, so you
would you would go into their system and buy tokens
which you could then use to exchange for crypto and
(08:13):
vibe I'm assuming vice versa, and we're about to get
into that later. At this point, cryptocurrency is becoming something
that the mainstream knows about, even if they're not dabbling
with it themselves. That's due in part to the coverage
of the Silk Road, which we did some episodes on
in the past. By February, just one month after Quadriga
(08:39):
launches their online platform, this thing called Mount Cox, which
had been the largest crypto exchange in Canada up to
that point, was going down in flames. They had lost
around eight hundred and fifty thousand of their customers bitcoins.
So Quadriga all of a sudden becomes like and that
(09:00):
a news story breaks and Pepsi is poisoned. Coke sales skyrocket.
That's that's a rough analogy for what's happening here. Quadrigo
was inarguably in the right place at the right time,
and it did not take long for the company to
end up capturing about eighty percent of Canada's entire crypto
exchange market. In simple terms, that's a ton of money.
(09:23):
Oh it's insane. But just just back to Mount Cox briefly,
like it was hacked. All of that money was stolen,
liked and fifty thousand bitcoins, which the value of today
I can't even do the math, but I mean it's
you know, millions and millions and millions of dollars um.
So there was also like a moment of like swooping
(09:43):
in and be like, Okay, we're gonna bring your faith back.
You know, We're gonna like have some kind of backing
uh to this system that will make sure something like
Mount Cox can't ever happen again to us. Yeah. The
other regal here is that at least again I keep
citing that vanity of your article so extensive. One of
the big problems was exchanging. This stuff had to occur
(10:05):
in Japan, like physically in Japan if you were going
to do certain types of exchanges. So uh, Quadrigo would
allow those exchanges to occur in Canada, which was a
major plus for the company. Right, yeah, yeah, yeah. Because
Mount Cox before its fall, because it was a Tokyo
based exchange, I think it was seventy percent of the
(10:29):
entire global bitcoin trade was going through Mount Cox. So
back to Quadrick. The world is full of business success
stories just like this, you know what I mean, and
it can be inspiring to people. Here's here's a couple
of guys who ostensibly didn't start with silver spoons in
their mouths, and now they are some of the biggest
(10:51):
players and one of the newest, most disruptive of tech industries.
But people started to take a closer look. They dipped
their fingers beneath the pr surface, and they found indications
of problems on the horizon. Quadriga did end up having employees,
one of whom was a hapless regulatory attorney. If you're listening,
(11:14):
shout out to you. The biggest problem that people noticed
immediately was that Cotton seemed to be functioning as sort
of a one man army. This one guy was running
the entirety of this gigantic exchange, this leviathan of an entity.
And also the company didn't have a lot of things
(11:36):
that these companies would be expected to have, like standard
accounting software or a way to not only track funds,
you know, in a transparent manner, but it didn't have
metrics against which to measure its own success. And I
love the point you brought up, Matt about the about
(11:58):
Mount Cox and Tokyo. If you wanted to cash out
from Quadriga, you had to physically meet in uh in
a location and take the funds in physical cash, So
like not getting that stuff wired to you. Yeah, like
a parking lot who doesn't like being able to make
(12:24):
a ton of money with a new investments? Right? But
if they've got eighty percent of Canada's crypto business and
there's only three people working for the company, who's meeting
them in the parking lot? Is it is literally one
of the three guys or four guys. Rather maybe it
was like a task rabbit situation. Sketchy, But remember we're
(12:46):
talking right, that's when we're really talking about race. So
not massive scale, not mad isn't like a massive number
even like the number of people that are into crypto
at this point it is probably maybe in the hundreds.
And just remember around that time we mentioned the silk road,
(13:07):
Bitcoin was being used for things that sometimes was being
used for things that you may want to operate more
on a cash system going in and out of it, right,
rather than having a bunch of things traced going into
a bank account, something like that, Right, beanie babies, POGs,
(13:28):
you know, vintage snapple, the kind of stuff you don't
want your friends knowing you're into. Yeah, um, but you're right,
you know, Uh, trafficking and drugs being a huge part
of that. That's what they were associated with in the
earlier days. This is this is something we have to
say this at first in Quadrigue's defense and in defense
(13:50):
of other companies in what Corporate America would call this space.
At this time, their hands were tied in the world
of banking because they could not, uh, they could not
conform to regulations, even even like a lot of banking
regulations end up being toothless at the top. You know
what I mean. If you are if you're reaching a
(14:12):
certain level of financial success, if the punishment for a
crime is a fee, then that is not a crime
for the people who can afford the fee. It's a
cost of doing business, and it's something that's unfortunately true
in many cases. I want to go back to what
you said, Matt, earlier. So Quadrico couldn't use these traditional
(14:37):
banking channels. They didn't have any business accounts because no
regulated bank, no normal bank would touch them. And this
was again a problem for similar outfits. So Quadrica used
other methods. They used what was called a platform credit system.
So like, um, let's say no, let's use you as
an example. You've got uh ten dollars and you put
(15:00):
ten dollars US or Canadian into this exchange. Um, let's
just say us for the sake of the example. When
you put in that ten bucks, you get what's called
ten Quadriga bucks, and you can trade the Quadriga bucks
on the exchange. It's almost like David Buster's money. Why
(15:21):
why do they have these shenanigans. Well, the problem is this,
If people are putting money into the platform and they're
buying bitcoins straight from there, that would mean that legally speaking,
Quadriga is a money transmitting entity. This alternative arrangement is
just them selling tokens, kind of like the way that
(15:41):
if you go to an art party or you go
somewhere without a liquor license, you can donate money and
they'll give you a you know, an award winning beer
like a PBR. This this feels like a very similar
thing to games that many of us probably play on
our phones, where you may buy from the game platform
(16:02):
tokens that can be exchanged for other things in a
weird way. You're never exchanging money for an actual thing
other than their tokens. I don't know, Yeah, not directly right. Yeah,
it's a it's a very it seems like a small,
weasily loophole, but it is an important one. It gets
(16:23):
stranger than that too. When customers wired money in the
funds did not go straight to Quadrica, they went through
a series of shell companies. Uh. These companies were meant
to kind of obscure things if they need to be obscured,
and most importantly, to avoid scrutiny of regulatory bodies. The
street name for this is, by the way, money laundry.
(16:47):
That's that's what it is. They used a lot of
they use a lot of processors. They also worked with
a big fish called Crypto Capital, which will come into
play later. But so far things are pretty exciting. Things
are on the up and up in the company starts
saying well, let's go public, and at this point still
(17:08):
the company is not quite you know, Trent Resiner is
basically nine inch nails. Uh. Cotton is pretty much in
the back end. He's pretty much Quadriga, but he is
still he still has support staff, he still is working
with Patron and making a move to go public. To
your earlier point and all about legitimacy in general, this
(17:30):
could be huge for the company because it's a stamp
of approval from the world of investors. But there was
another wrink goal By the end of UM, they were
not doing particularly well. They were operating at a loss,
the hefty loss ninety thod dollar Canadian dollar net loss um.
(17:50):
And it's a little tough to kind of take a
step back and see the whole view here because Quadriga's
accounting was really really add But Patron did seem to
think that there was a cash flow problem, and he
put a hundred and fifty k of his own money
in along with seven hundred K that they raised from
some other investors. And in March of that year, after
(18:12):
another round of publicly announced fundraising, Quadriga said that it
was ready to go public, but that never happened. Yes,
and this is a weird story, and it only gets
weirder from here. We're gonna take a quick break and
hear a word from our sponsors and we'll be right back.
(18:36):
We've returned. Yeah, and the company has like a functional
revenue of a little north of twenty dollars, So it's
not it's not like a particularly rosy uh. The issue
here is that the real picture of their net loss
versus gains or what have you is really tough to
(18:58):
see because that that accounting was not up to snuff.
So it's December, two rounds of fundraising, pretty lucrative rounds,
the company has burned through all of that new investment,
and Cotton pretty much fires everyone, including interestingly enough, their
regulatory attorney. Fast forward, Michael Patrion is also out. He
(19:23):
cuts ties with both Quadrigua as a company and with
Gerald's Cotton. Cotton is now fully Trent Resider nine inch
nail style on his own, but loneliness could be, you know,
a damaging thing for some human psyches. Cotton created a
dummy account on the exchange. He made a friend, this
(19:46):
friend's name Chris Markey, and Cotton again had had control
over the entirety of the back end. So what Cotton
did is he credited is new newly minted friend to
Chris Markey with a ton of fake money, and then
through Chris Markey, Cotton bought real bitcoin and he repeated
(20:07):
the process with etherium. Fast forward. He's doing this for
a while, he's moving wing. Cotton is essentially printing money
at this point, he's he's assigning his pal Chris of
fake value or a spoof value, and then using that
to purchase real crypto U and he's doing this to
(20:30):
in his extreme egregious degree. The Ontario Securities Commission will
later find that of trades on Quadrica are actually Chris
market trades. He's trading against his own customers. He created
a ponzi scheme. Is that like the robbing Peter to
pay Paul kind of situation? Yeah, very much so. A
(20:52):
ponzi scheme works as long as it has uninhibited growth.
And what you do is you you make these wild
promise is of profits far above the norm that an
investor would expect, and every time somebody pays into this,
you take the money that they have paid and you
give it to the folks who have been in the
game longer and are expecting returns. The problem is, if
(21:16):
you're like Ponsi, the namesake of this scheme. Then you're
you know, you're taking you're taking a taste at the
very minimum out of everything people are doing. Um. It
could be as something as small as like a transaction fee.
But in most cases it's not. Because Ponzi schemes are grifts,
they are scams. Uh, they're not sustainable. And also what
(21:37):
they need is a constantly presumably replenishing pool of funds
and unbridled access to it um and nobody thinking to
check on it, you know what I mean, Like either
you're like a money manager or something. UM. There would
be no indication, there would be no red flags for
someone to be like, oh my money is gone, um,
(21:58):
because as far as they're concerned, the money still they're
it's just being moved around. There's nothing earmarking who that
money belongs to. It's just part of the big pool,
right yeah. Yeah. The house of cards is falling around eighteen,
it's reaching the it's reaching the end of the typical
Ponzi scheme pattern, which means new deposits are directly being
(22:21):
used to fund withdrawals from more and more people saying, hey,
where's my money? What's the delay? And you can see
the forums where people are saying, well, the delay is
really on the Canadian banks. They're the bad guys. We're
trying to get this to you. And then Cotton smell
Cotton is um you didn't know about his past. You
(22:43):
would say Cotton has an extreme intuitive ability to sense
what's down the road here because he actually transfers some
of the money he's stole back into the exchange as
a stop gap as a band aid. And uh October,
he marries his longtime girlfriend, Jennifer Robertson que the music
(23:06):
Wonderful Things. Uh. Just a month later, and this is
something Matt you mentioned on that listener mail segment. He
makes a will and in his will he leaves all
of his assets, well, he leaves some to his dogs chihuahuas,
leaves all uh yeah seriously, yeah a d hunter k
(23:29):
And uh. Three days after signing this will, he and
his new bride traveled to India. It's the afternoon of
December eighteen. It's a little bit past five pm. Cotton
and Robertson land and ha Poor India, and they check
into a hotel named the Oberoi raj Villas. Cotton, according
(23:51):
to the story takes ill, and a day later, he
officially dies of complications from Crohn's disease. Uh he is.
Cause of death is listed as cardiac arrest. And depending
on which death certificate you read, he either died at
that hotel, or he died at a private hospital called
(24:14):
Fortis Escorts, or did he die at all. Here's where
it gets crazy. So notice, folks, we've used the word
allegedly and officially when describing Cotton's death in that earlier
Listener Male segment. We also hinted at this controversy through
(24:35):
through using these same terms. And the truth of the
matter is that many many people, not just burned customers
or victims of this outfit, they believe that Cotton may
have faked his death. Why why would you do that?
How would you do it? We've kind of already said
(24:56):
this uplement and established the fact that Cotton was in trouble.
He knew that not only local authorities, but the Feds.
We're circling him, they were sniffing around, they knew, they
knew something was up. And he's got all this money.
So like you can only imagine that, like if he
(25:19):
was if he wasn't already on the run by going
to India and having this marriage and honeymoon. Right. Uh,
he was gonna be on the run very soon after that,
or you can imagine him being prepared for that and
or preparing for it. But then there's just the cause
of his death in general, how it occurred and how
rapidly it came about. Right, Yeah, Cron's disease. For anybody unfamiliar,
(25:43):
we mentioned this previously, Crown's disease is a kind of
ib D inflammatory bowel disease, and it can be a real,
a real pain on multiple levels because it can give
you diarrhea, weight loss, fatigue, abdominal issues. It can lead
to malnutrition. But dying of Crohn's disease would be an
(26:08):
exceedingly rare event. Yeah. A good friend of mine I
grew up with lots of sleepovers and stuff like that.
Their mother had a brother's their mother had Crowns disease
and it was very manageable. It was painful when there
were flare ups, but it was the kind of thing
you take medication for your whole life, um, and it
(26:30):
would allow you to live a pretty normal, you know,
day to day life. It wasn't something that I witnessed,
you know, and I was over there a lot. I
never witnessed like some kind of crazy situation where there
was an episode of some kind. It was just something that,
you know, maybe she was tired that day or something.
But that was the usually the bulk of it. But
(26:50):
I've certainly never really heard of killing anybody, not to
not to say that it doesn't happen, but it is
possible maybe that he had a pre existing heart condition,
of that she was unaware, and that the flare up
of Crone's somehow, um somehow, in a dark, unenviable lottery
led to his unexpected death. It's possible. Again, But as
(27:13):
far as someone dying just from straight up Crown's disease,
the best we can say is that it is very
very rare. So as we were saying, many many people
don't think he actually died. Why, uh, yeah, it's he
had a motive, Like you said, Matt. He also he
also had some really sketchy stuff about his again official demise.
(27:37):
Local governments, not just in India but in different parts
of the world can and have been bribed for what
some people might find to be a surprisingly reasonable fee.
The story of Cotton's body gets pretty murky, to be
honest with you. From what we found, there was a
doctor at the Mahatma Gandhi Hospital who refused to sign
(28:01):
an embalming certificate on December ten, and Cotton's body was
taken to the SMS Medical College where the supervisor there
never actually saw the body. The embalming certificate was signed
and processed by a junior staffer. So we would say, okay,
(28:23):
find guys, I get it an embolving certificate that sounds
official and legit. But usually when people die there's a
death certificate. So what happened to that? And that the
first thing investigators would look at. Yeah, and they found two.
So they had doubled up on the death certificates. There
at least two out there. One list is place of
(28:44):
death as Forda's Hospital, but another one listed as that hotel.
Raj villis also the name on the death certificate for
the hotel, which was obtained by an outfit called coin desk. Uh.
The name is misspelled. Could be a clerical error, you
know what I mean, It's it's definitely possible or what
(29:06):
just like what's the alternative sloppy? Yeah? I think either
like sloppy and clerical error would be I think pretty
much the same. My question is, you know, if you're
looking for discrepancies, that's a discrepancy that pops out. You know,
that's one to to highlight. But what what would be
the advantage would he you know, would the plan be
if one was faking one's death to come back a
(29:29):
decade or so later and say, actually, that was a
different Michael Cotton who died nice try coppers. So wait,
so it's you know, his the official spelling of his
name is ce t T E N. Was was the
misspelling changing it to an? Oh? It was? I believe
it was a k oh Cotton with a K. So
(29:50):
maybe that was just the really extreme version of him,
you know, spells it with a K like X is
are in there somewhere. Actually it was Gerald Katar, brother
of former sn L actor Chris Katal. I guess all
I'm saying is that would be a pretty obvious ruse.
If you're gonna do it trying to be you know,
(30:10):
covert about it, you think you change the E well,
I mean you never know who filled it out? Well,
how much was you know, his wife involved in all
of this? There's some weirdness when you look at her
too and her activities. Because he passes away officially on
the eight. Then two days later she departs right she
(30:32):
she had takes off out of India, and she lets
the the orphanage know that that they were going to
do the charity work with and have that ceremony for
uh that she lets them go through an email that
she's not going to be there because she's got to
go back to Canada with her husband's unfortunately deceased body.
But I mean, I mean, the biggest red flag of
(30:53):
all here is the will, you know, making it that
close to the supposed demise of this individual. I mean
not to say that, you know, forward thinking young people
don't make wills in their thirties, but it's not certainly
not something that's top of mind, you know, especially when
you're living large, you know, like that. I mean, maybe
(31:16):
that's maybe it's the opposite, Maybe it's exactly that reason.
When I'm living large, there's something were to happen to me,
I would hate for my you know, funds to to disappear,
especially with crypto, where there's no real law governing it
or like how it's not the same uh laws, I
believe governing like you know, a bank account or or
property or something like that. So um, but still super
(31:37):
weird that it was just days mere days, and everything
just seems too explainable. You know. Oh, it's rare to
die from Crohn's disease, but you know, the co morbidity,
it certainly can happen. Um, it's a little unusual, but
it seems legit. Yeah, I mean, every everybody so far
has died at some point is kind one way ride,
(32:01):
unless you're Henrietta Lacks, And I don't think a lot
of people would envy that position. But but yeah, it's
a good point. Like did he get a vibe, did
he have some intuition that says, hey, I need to
button things up just in case maybe a twinge of
heart pain or something like that. Or was this part
of a plan? Uh? Yeah, that's the thing. We don't
(32:23):
want to unfairly disparage his his widow, especially, you know,
especially imagine the idea of of losing the person you
just married on your honeymoon. That's like that is that
is almost impossible for a lot of people to imagine,
or I hope it's almost impossible for a lot of
(32:45):
people to imagine and despite this grief, this enormous grief
beyond words, like you said, Matt, she's able to leave
the country. She's not only able to leave the country,
but she's able to return to Canada with her husband
and his body in a very short amount of time.
How do we know this. We know because on December four,
(33:06):
Cotton's remains were buried in a closed casket service in Canada.
Fast forward a month later, Jennifer Robertson announces her husband's
death to the world on January, meaning there was another
gap in time. There was a month before the customers
of Quadriga, the people following it had any real idea
(33:27):
of what was going on other than you know, they
were getting a lot of delays if they tried to
withdraw their funds. And around this time, people were no
longer able to take their money out of the exchange.
It was no longer a two way street. The company
in fact ceased operations, but people were still able to
put money in. And that money because you know, we
(33:49):
explained the stage the Ponzi scheme is at now, that
money was used to support the spoofed numbers that Quadriga
was was so deep into at this point, and then
if you fast forward to January thirty one, the company
finally announces bankruptcy. Gerald William Cotton Jerry to his friends,
(34:12):
had died. Most of the world agreed, and when he died,
he apparently took his passwords to his grave. Jus lease.
That is one thing they say in the crypto you
know sphere or whatever, they say, uh, not your code,
not your coins, something along the lines of that. So
(34:33):
there will be these key I'm sorry, not your keys,
not your coins. So in other words, if you've lost uh,
some unique identifying password or some random number generator thing
that like uh, you know, UM exchange like this or
like a you know, a wallet or a bank generates
either those are dead to you. Those coins they just
(34:54):
exist in the ether. U it's impossible to get to
because the whole point of the blockchain is is about encryption,
you know, it's all about UM protecting it from you know,
theft um. But that's why I was just sketchy from
the first place that the whole deal with this company
was only these four guys. They had too much access.
And apparently it wasn't the four it was really just Jerry, right,
(35:15):
And this is we know a lot of this because
of smet excellent investigative work. We also know about it
because of some work by regulatory bodies who went in
and really did some forensic accounting in uh in a
way that gets pretty disturbing. Will pause for word from
our sponsors, and when we return, we'll talk a little
(35:37):
bit more about the aftermath of Cotton's again official demise.
Show me the money, Jerry, Oh my god, I was
waiting for that one. Is that a movie reference? That
is right? Well, Jerry McGuire, Yeah, Jerry McGuire, he says,
(35:58):
show me the money. Cup of Gooding Jr. Says that, damon. Also,
you complete me o. Wait No, you had me at Hello.
You had me at Hello, You had me at Hello,
you had me at Crypto. So uh, that's one of
the questions when did this money go missing? Quadriga and
these things called cold wallets, And it turned out that
(36:20):
months before Cotton's official death, several of these wallets had
been emptied. They have been emptied. In fact, right around
the time one of their main processors, Crypto Capital, that
also crashed and burned. Their accounts were seized by government agents.
Can we can we talk about a cold wallet really fast. Yeah,
breakdown a cold wallet. It's like cold storage, right, It
(36:43):
is kind of like cold storage. It's a hard drive
that's not connected in any way to the network, the internet.
It's just your your stuff lives on that hard drive.
It's over there, nobody's touching it. It's secured while it's
physically secured. It's the kind of thing that if you
were going to protect your own stash and he didn't
have it on an exchange, because again, you're really they say,
(37:04):
don't keep your your stuff on an exchange, you could
literally put them on a hard drive yourself and put
that in a safe deposit box. Yes, but buy or
beware because you might find yourself in the unfortunate position
of that that guy who lost his hard drive, his
cold his cold wallet in a junkyard and currently I
(37:28):
think still I haven't checked on him in a while.
I think still had like an open reward for someone
to help him find it. It's an unenviable position. But yes,
those several of those appear to have been empty before
Cotton's demise, and later estimates from regulatory bodies concluded that
(37:49):
all told, there was twenty five thousand, six hundred missing bitcoins,
eleven thousand bitcoin cash, eleven thousand bitcoin cash, s V
four hundred and thirty thousand ethereum, and thirty five thousand
bitcoin gold. This may be gobbledegook to a lot of
people outside of the world of cryptocurrency, but the maybe
(38:10):
the best way to explain it is that as of
around March or March February of that adds up to
something like one eight five billion dollars. And this is
in twenty valuation, So I mean, you know, a bitcoin
today I think is worth what like sixty five grands. Yeah,
(38:30):
that's what I'm saying. Like, as of around February March
of this year, that total would add up to like
one that today. Got it perfect, And now, with great
interest in delight, I propose that we turned to the
story of Michael Patrick, because, as you may have noticed,
fellow conspiracy realists, we were taking pains to say he
(38:52):
was going by that name at the time, or he
calls himself that now, his original name is not Michael Patrick,
it is Omar to Nanny. Yeah, Michael Patrick already kind
of sounds like a made up name, doesn't it. Um
he changed his name at least twice that we know of.
He was, in fact, a convicted felon who worked with
UH an identity theft ring known as the Shadow Crew.
(39:15):
Um and Patron and Cotton almost certainly knew each other
well before their venture with Quadriga, and to me, this
already implies that Cotton likely knew about this the Shadow Crew.
He seems like the type. Again. Remember that all those
gaps we were talking about, right, is that your theory? Ben?
(39:36):
I don't want to scoop you on that. You talked
about the theory about how he was, how they were
putting together the scratch for this, you know, supposedly more
above board venture with Quadriga. You think it was from
stealing identities and just like like doing something. Dude, we're
gonna talking about this, and Ben's gonna hit you it's crazy.
They're they were doing so much stuff when they were
younger people. Yeah, well there's all that time. Yea, Well,
(39:58):
let's those little I'm sorry, I'm just my mind is spinning,
um right, yeah, keep it spinning, man. Yeah, We're we're
gonna we're gonna spin our own heads here exorcist style. Uh,
and we're gonna do it with the help of two people,
a Reddit user named q c x I and T,
and some excellent research by Amy Castor Like Castor Oil,
(40:20):
they found strong indications just what you're saying, the Cotton
and Patron were active in Ponzi schemes earlier, different new,
different older iterations kind of harbingers what would become Quadrica Castor.
In fact, Tracey's Cotton's criminal career all the way back
to the tender age of fifteen, when a lot of
(40:42):
people in the US were like stressed about getting their
learner's license. This guy was learning how to puppeteer financial
things on a on a macro scale. That's insane. Can
I ask a quick question, um, what the thing that
makes a Ponzi scheme illegal? Is the fact that you
are toying with other people's funds in ventures that they
(41:05):
are not aware of that are very risky in the
hopes of reaping high yield rewards. Or Am I missing something?
Because I mean that's what a money manager does. But
usually you have an understanding of the types of risk
or the levels of risk that your your money managers
gonna take with your money, and you sort of determine
that is this a the fact that they don't know
(41:27):
that the money is being moved around. I mean, presumably
they want their money to grow. I mean, can you
maybe just explain that, Ben or or Matt, uh what
what part of it makes it illegal? Because on its surface,
it's got the shell of legitimacy. I mean, I can
tell you a little bit just my understanding of these
h y I P is a right high and high
(41:49):
yield investment programs. Yes, okay, so yeah, I mean these babies,
these babies are they're just or ripe. If you're a
smart person, you can set up some like legit sounding names.
You can do some interesting stuff. And the work of
Amy castor there and that Reddit user, they really look
(42:11):
into some of the stuff that Cott was doing back
when he was fifteen years old. And you can also
look at that Vanity Fair article we talked about there
where they discussed like some some things that they did, like, uh,
Jerry set up stuff when he was a kid at
his parents computer that took people's money and then exited
(42:32):
with those people's money and just shut the thing down.
And he was communicating with this Michael Patron guy before
he was Michael Patriot. I guess I don't know, I
don't know if it was before he was Michael Patron
or not. Uh, but they would communicate it on this
place called talk Gold, which was a place where they
could exchange information and basically prop each other up and
(42:52):
support each other. Yeah, exactly, And he gave in the
in the kind of if I can explain it in
cinematic terms, here is why ponzi schemes are illegal. Here's
why pyramid schemes are illegal. First, they're unsustainable. But the
truth of the matter is that they ultimately cannot expand
beyond the size of the population of planet Earth and
(43:17):
to be successful forever without falling apart, they have to
eventually expand past that threshold. Now, with the emergence of AI,
could there be you know, unending ponzi scheme. Maybe it
depends on how quickly you can mint new sentience. Right
but right now with meat bags, Yeah, that's why it
breaks down because of the math, uh, and the idea
(43:39):
of that growth. But to the growth is the that's
a red flag. If you're you're airring into a situation
where growth is promised, you know, that should be a
red flag. Like this is probably not something that's real,
but the interesting thing is like nowadays there are these
crypto projects, you know, where you get these tokens or
these like coin pairs where you can get like you meant,
(44:00):
a new token by pairing a coin like a finance
coin or or uh bitcoin with a token of these projects,
and they do promise a hundred percent yield um and
if you watch them over time, it's called yield farming.
It's this whole thing and and and again it is
right for exploitation. And we had a story of the
(44:21):
day about this rug pool situation where with the uber
or crypto eats. So this is way pre that. But
those things do exist today, still very much in the
crypto space. They're just not uh necessarily on the more
legitimate exchanges. This would have been a wild West period
of exchanges too, you know, as evidenced by the whole
meet me in the parking lot to get your money. Um.
(44:42):
It's fascinating stuff. Yeah. Yeah. And also I guess if
you want to be less cinematic and more technical. Uh.
The reason a ponzi scheme is illegal is because the
money that's paid to the ponzi investors is described as income,
but it's not income. It's a distribution of capital. So
they're just moving the money around, pretending that that money
(45:06):
is coming from some sort of profit, which it is not.
And that's my last question is that they're until they're
inherent in this model, there is no profit. I mean,
I assume the value of the coins being invested grow
along with the market, but this fund or whatever isn't
actually doing anything at all to other than moving the
(45:28):
funds around to pay this fake dividend to the older
investors using the newer investors money, and then eventually it
just catches up right, Yeah, yeah, I mean it's tremendously
profitable for the person running the grift or the people,
but maybe not so much for the customers. So we
know a little bit about how Patron made a name
(45:48):
for himself because these guys, in terms of criminal activity,
they were peanut Butter and Kelly too great taste that
tastes great together. Uh. Patron. Patron started out, as far
as people can tell, by helping helping others launder money
through a mixing program. You mix it in a token
(46:08):
scheme called e gold, and then later you would be
able to get your money out for a reasonable fee
and your money would be clean Uh, the honey ultimately
gets deported as a result of his conviction for identity
fraud slash theft with the Shadow Crew, and then he
and Cotton appear to have teamed up for another operation
(46:30):
using the Midas Gold Exchange or sometimes called m Gold
Exchange in two thousand and eight, and they were big
piece of what they were doing. Here was a pre
bitcoin digital currency called Liberty Reserve, and you can imagine
it came with some political leanings. It was. It was
like imagine, um, so just like an earlier example right
(46:51):
no where we had, you buy one Quadriga buck or
ten Quadrica bucks. One dollar is equal to one Liberty
Reserve token basically, and you can send that token to
anyone else anywhere on the network with you know, a
little big, a small taste going to Liberty Reserve itself
(47:13):
into as a transaction fee. Imagine a PayPal that doesn't
need you to verify your identity. Huh. You can already
see the potential, right, folks. You can already hear the
illegal money, uh just pouring in you. Also, all you
need is an email address, and there are plenty of
ways to get around email address stuff, or at least
(47:35):
there there were at this time. It's probably a little
tougher now. This company, Liberty Reserve, it grew to more
than a million users before it was shut down in
and regulators at the time called it the largest money
laundering scheme in US history. They were actually able to
do this because of the Patriot Act, which gave them
(47:57):
powers They wouldn't ordinarily have to, um, you know, to
connect this with possible terrorism or drug drug running through
the trade of US currency abroad. But it was found
basically be funding that, right, those exchanges were funding trafficking
of drugs and other things and terrorism at least in
(48:18):
the um overall Liberty Reserve and MIGHTUS gold Exchange. Yeah, yeah, Oh,
they weren't framed, Make no mistakes. It wasn't a stitch
up job. But it goes deeper than that, because at
the same time the same gear Liberty Reserve is shut down,
Cotton and Patron founded Quadriga, And it goes deeper than that,
(48:40):
Like dead pres says, it's deeper than wrap. It appears
that Cotton and Patron had been, as you said, Matt,
interacting on several other schemes through other forums, things like
black hat World, and as you mentioned talk gold, and
later investigations linked several handles to both men um In
Cotton's case, one was Scepter and the other was Murdoch
(49:03):
leet or you know, for people who don't use lead speak,
Murdoch one three three seven. Interestingly enough, Murdoch one three
three seven was active in August of nineteen months after
Cotton officially died. So you think that's him. Yeah, so
people who people who believe that he successfully faked his
(49:26):
death will point to that as evidence of his activity.
But again, with the anonymity of the Internet for most people,
is it possible that somebody else was just you know,
just had his log in. That's definitely associated with him,
like and for real okay, got it? Oh, yes, for real, Yeah,
it's associated with him. If you want to learn more
(49:46):
about that again, go to UH search for Amy Castor's
work on it, which does does a great and thorough
job of of linking these together. And also Honorable mentioned
to Crypto Capital mentioned them as one of the big processors.
Their president was a guy named Ivan Manuel Molina Lee.
(50:09):
I don't know if you have heard of him in
the news, folks, but he was most recently in the
news because he was arrested in Poland in twenty nineteen
in connection with money laundering being part of an international
drug cartel. And if you look at the if you
(50:30):
look at the charges against him, he apparently is also
charged and cover up to hide the loss of eight
hundred and fifty million dollars in client and corporate funds. Yeah. Yeah,
So this example I think is important because we don't know,
we're being the public, don't know how deep these things go.
(50:53):
We don't know how much money is actually being moved around,
and we don't know how these folks are or are
not really did to each other in the world of crypto. Yeah,
it's fascinating to I think I said this one. We
did the story in Strange News or listener mail rather. Um,
I don't know that we've still yet have like a
public sense of who the big crypto mafioso's are, you know,
(51:16):
who who the big players in the in the in
the crime world associated with crypto r um because even this,
you know, UM, Jerry cotton Fellow very much not a
household name. We all admitted that and didn't know about
until we heard about this um not Netflix documentary that
was coming up and this guy Ivan Manuel Molina Lee.
(51:37):
I mean, he's accused of laundering tons and tons of
money for international drug cartels using this crypto um format
called bit fine x um, which is run by the
same company who created something called tether, which is a
one to one US D kind of um uh substitute.
(51:58):
You know, it's it's it's it's peg to the US dollar.
So it's a way that I believe crypto people can like,
you know, pay for things using tether because it's like
not the same value as a dollar um one to one.
And again I'm not an expert of it. I just
kind of you know, know, it has to be dangerous,
but tether is very popular and it's something that's very like,
(52:19):
you know, household and then at least in the crypto community.
So for that company to be associated with this guy,
I mean, what else is there? You know, who is
the Toshi Nakamoto? Right, No one officially knows um, but
when there are, there are a couple of leads of
very incredibility, right or very implausibility. Yeah, I think this
is this is an excellent example. Um. The world is
(52:42):
not entirely aware of how deep the rabbit hole goes here.
This is a renaissance of money laundry at the very least,
you know what I mean. These are the glory days. Uh,
that's what future financial criminals may well call them. So
where are we act currently? As we said, it was
without saying that not everyone believes Gerald William Cotton has
(53:04):
actually left the building. As a matter of fact, lawyers
had been pushing to have his his again official grave exhumed. Uh.
This is a request that Canadian authorities have so far denied.
The Netflix documentary we mentioned at the top, Trust No One,
The Hunt for the Crypto King, premieres in and it
(53:26):
plans to investigate the case following the built investors who
are searching for and I think us equivalent twenty two
d seventeen million dollars that Cotton himself is believed to
have absconded with. But not everybody agrees. You'll find a
lot of people who believe, yes, Cotton was a thief.
(53:47):
Maybe he was even addicted to the thrill of scamming. Uh.
But they're kind of but they don't buy into the
theories that he could have faked his death. Instead, they're saying, yeah,
he was the thief and he also genuinely passed away
unexpectedly on his honeymoon in India. And the thing you
can say in the favor of folks holding that view
(54:08):
is that it is incredibly difficult to commit pseudo side
in a sustainable way. For further reading, checkout Elizabeth Greenwood's
awesome book Playing Dead. Uh. And they're also two great
podcast we wanted to recommend that our deep dives into
this story. One of the first is Exit Scam and
(54:29):
that what's the uh what's the name of that second
one that we were tuning into. It's a CBC podcast
is called a Death in Crypto Land. Yeah. Yeah, and
they're they're good listens. Check them out. I mean to
be fully transparent. You know they're not. Um. This is
not us plugging a podcast for anything other than the
(54:49):
substance of it, especially if you're interested in this story.
As far as the officials are concerned, the case of
the death is pretty much closed. But again a lot
of people who lost a lot of money are convinced
there's more to this story. At this point, I have
to ask you guys before we wrap that. Noel fellow
(55:13):
conspiracy realist tuning in, what do you think is cotton alive,
Cotton passed beyond this mortal veil. I think he did it.
I think he's one of the few success stories of
being able to properly do this, because again, part of
the crypto thing is like it being untraceable. We're not untraceable,
but like you know, if you know the right people,
(55:35):
you can spend that money um without tipping off the
I R s and live off the grid, a different grid,
but but off the main grid. If he is truly
the genius guy than many believe he is, he did
some things that would lead me to believe he faked
his death. He got that cessna, he was getting his
(55:58):
pilot slice as yours I need to fly. He got
a boat, a yacht that he could you know, learned
how to pilot that thing or two drive that thing?
What he uh? He also that that yacht is also
highly customized in a way that could allow someone if
they if they are lucky, avoiding detection. It could allow
(56:20):
someone to travel internationally without all those pesky border regulations. Yeah,
but he his wife tried to sell it immediately after
he died. Right. What what I'm thinking is he learned
the skills to be able to fly and to you know,
drive a boat, like he knows how to do this now.
(56:41):
And if he's got enough of this money in cash form,
then he's traveling around the world. He can make use
of it and travel between countries, perhaps in a more
quiet manner. Uh. He also allegedly was traveling around the world,
perhaps allegedly leaving money in various accounts. Again, if you
(57:02):
believe that, that's part of the Mastermind story, like you
believe him to be a Mastermind criminal, I don't know.
I'm certainly intrigued by the whole thing. And if you're
as intrigued as I am, like, like we said, there's
stuff for you to check out, to continue down the
rabbit hole. If you want to reach out to us
and tell us what you think, you can find us
all over the internet, boy, can't you. Ever, We don't
(57:24):
make it hard at all to find us. He can
find us on Facebook, you can find us on Twitter,
you can find us on YouTube at the handle Conspiracy Stuff.
We're also at the Conspiracy Stuff show on Instagram. And
if you don't want to get on the internet at all,
why not to pick up a telephone give us a
call using your hands and mouths yes. So number is
one eight three three std w y t K. When
(57:45):
you call in, give yourself a cool nickname. You've got
three minutes to say whatever you'd like. If you've got
more that you'd like to send to us that can't
fit into those three minutes, we highly recommend you instead
send us a good old fashioned email. We are conspiracy
at i heart rate dot com. Stuff they don't want
(58:21):
you to know is a production of I heart Radio.
For more podcasts from my heart Radio, visit the i
heart Radio app, Apple Podcasts, or wherever you listen to
your favorite shows.
From UFOs to psychic powers and government conspiracies. History is
riddled with unexplained events. You can turn back now or
learn the stuff they don't want you to know. A
production of I Heart Radio. Hello, and welcome back to
(00:25):
the show. My name is Matt, my name is Noel.
They called me Ben. We're joined as always with our
superproducer Paul Mission controlled decond. Most importantly, you are you.
You are here, and that makes this the stuff they
don't want you to know. Cryptocurrency, conspiracy, corruption, crime, and
(00:46):
cotton but not spelled the way you would think. That's
what today's episode is about. It comes to us courtesy
of a fellow conspiracy realist, Chris, who wrote to us Chris,
if you recall in a earlier Listener mail segment, and
Is had asked us more about the strange story of
the officially late crypto multimillionaire Gerald William Cotton or Jerry
(01:10):
with a G to his friends. What follows is a
series of strange, interconnected conspiracies hindering on I mean hindering
on scams, greed and griffs, but just possibly hindering on
the concept of pseudo side. Uh. We've got a lot
of stuff to unravel here. We may not get to
(01:32):
it all, but we are excited to dive in with you.
So here are the facts. Who was a young, young
dude at the at the height of his achievements. He
was born May eleven in Canada. Yeah, I mean it
seems pretty typical for you know, burgeoning uh kind of
boy geniuses in this crypto space. You know, it's sort
(01:54):
of like a almost become like a meme or a
bit of of a parody. But yeah, he was born
Gerald William on May eleventh of nineteen eight in Canada. Um.
His official death day was December nine, two th eighteen,
meaning that he would have been a thirty years old.
A fifth story is to be believed in Cotton lived
(02:15):
in Old Belleville, Ontario, before he headed on down to
business school at York University in Toronto, and uh he
graduated there in two thousand and ten. He had a
bachelor's degree in business administration. So you know, he's on
his way up to to have a legit job making
tons and tons of money. I think he already had
(02:38):
a job, but we'll we'll get to you. He definitely did.
He had a side hustle, yeah, or maybe college was
the side hustle unclear, but I have opinions there is
an interesting gap in Cotton's timeline from here's what we know. Um,
he was very busy, as as you and I just
(03:01):
eluded Matt uh both during his higher education, probably before
and uh. By the end of ten he had relocated
to Vancouver and he had started what would become for
a very brief time, a massively successful company. If you're
(03:21):
not in if you're not one of the people who
reads about cryptocurrency, cryptocurrency, in bitcoin and so on, you
might not have heard of Cotton before I Flicks documentary
drops next year. But if you are from familiar with
the world of cryptocurrency, you know a little bit about
his professional past, which is edging into legend at this point. Anyhow,
(03:45):
he founds this outfit called Quadriga Fintech Solutions with a
business partner. Yeah, not the not the most um, not
the most smooth name. But his business partner is going
by the name my called patron. Will explain what we
mean by that a little later. I gotta I gotta ask,
I mean, is this the kind of thinking name of
your company to make it sound like a big, massive
(04:08):
you know, biotech firm when it's all kind of really
just smoking mirrors, or is there something behind these kind
of imaginary sounding words like quadriga and fintech. Fintech is
quadriga is? I think it is a kind of So
I was looking this up, and I was trying to
figure out if I could, if I could find some
(04:30):
clear evidence of why they named it this way. But
a quadriga is a real thing. It's a chariot that's
drawn by four horses. It was used and they're all
in one straight line. It was used for chariot racing
in the Roman Empire, like some ben hur type stuff. Yeah.
According to a Vanity Fair article, the that quadriga, the
(04:52):
four person chariot was used because there were four people
who basically controlled the funds that flowed into and out
of this exchange which we're going to tell you about,
which which will figure into the story a bit later.
The specificity right, the specificity of right, and you can't
recommend enough that article matches cited Ponzi schemes. Private Yachts
(05:17):
won't give you the whole title, but it's the strange
tale of Quadriga by a journalists named Nathaniel Rich, I
was not able to independently, like discover exactly why they, uh,
these two guys that we know of named it that.
But Quadriga is a real thing. And then also Rich
(05:38):
seems pretty convinced that it was named for the idea
of these four individuals powering it. So so it's it's
weird because Quadriga itself is not really not so much
the subject of the action here. It's the operator of
what's called a cryptocurrency exchange, one's called Quadrigua c X,
(06:02):
which over the course of a few years, just a
few would go on to become the largest cryptocurrency exchange
in the entirety of Canada. Uh that this is where
we see I think one of the first plot wrinkles,
and I know everybody clocked it here too. You can't
start one of these without something to financially prime the pump.
(06:23):
So the big question is where did Patron and Cotton
get there, get their seed money to begin with? How
did they start the exchange. That's a question we can
speculate at. We can speculate at later, but for now,
just keep that in the front of your mind. Somehow,
these two guys who have interesting past that the customers
(06:45):
of Quadrigue are not aware of. Somehow they managed to
start this thing that automatically blows up. And why does
it blow up? A lot of it goes down to
timing and culture. I think we can say that a certainty. Yeah,
and in I mean, a crypto exchange is literally what
it sounds like. It's like, you know, where you can
(07:07):
convert one type. You know, first of all, you can
buy cryptocurrency using American dollars or euros or in this
case Canadian um currency. Uh. And then once you've done that,
you'll say you you take your initial you know, um
fiat currency and invested in bitcoin or whatever. You can
then exchange that currency into any number of hundreds of
(07:30):
other currencies and usually it get It lends these these
coins more legitimacy when they end up on a prominent exchange.
So like some of these fly by night current cryptocurrencies,
they won't be on the big exchanges um. And if
they do, it makes big news and oftentimes that in
and of itself can move the price. You know, oh shiba,
a new coin is now all of a sudden on
(07:51):
crypto dot com, and that can really balloon the price
of a coin like that. We're probably gonna get into
this later bit I'm assuming, but this exchange, Quadriga Exchange,
actually used tokens as a system of exchange, so you
would you would go into their system and buy tokens
which you could then use to exchange for crypto and
(08:13):
vibe I'm assuming vice versa, and we're about to get
into that later. At this point, cryptocurrency is becoming something
that the mainstream knows about, even if they're not dabbling
with it themselves. That's due in part to the coverage
of the Silk Road, which we did some episodes on
in the past. By February, just one month after Quadriga
(08:39):
launches their online platform, this thing called Mount Cox, which
had been the largest crypto exchange in Canada up to
that point, was going down in flames. They had lost
around eight hundred and fifty thousand of their customers bitcoins.
So Quadriga all of a sudden becomes like and that
(09:00):
a news story breaks and Pepsi is poisoned. Coke sales skyrocket.
That's that's a rough analogy for what's happening here. Quadrigo
was inarguably in the right place at the right time,
and it did not take long for the company to
end up capturing about eighty percent of Canada's entire crypto
exchange market. In simple terms, that's a ton of money.
(09:23):
Oh it's insane. But just just back to Mount Cox briefly,
like it was hacked. All of that money was stolen,
liked and fifty thousand bitcoins, which the value of today
I can't even do the math, but I mean it's
you know, millions and millions and millions of dollars um.
So there was also like a moment of like swooping
(09:43):
in and be like, Okay, we're gonna bring your faith back.
You know, We're gonna like have some kind of backing
uh to this system that will make sure something like
Mount Cox can't ever happen again to us. Yeah. The
other regal here is that at least again I keep
citing that vanity of your article so extensive. One of
the big problems was exchanging. This stuff had to occur
(10:05):
in Japan, like physically in Japan if you were going
to do certain types of exchanges. So uh, Quadrigo would
allow those exchanges to occur in Canada, which was a
major plus for the company. Right, yeah, yeah, yeah. Because
Mount Cox before its fall, because it was a Tokyo
based exchange, I think it was seventy percent of the
(10:29):
entire global bitcoin trade was going through Mount Cox. So
back to Quadrick. The world is full of business success
stories just like this, you know what I mean, and
it can be inspiring to people. Here's here's a couple
of guys who ostensibly didn't start with silver spoons in
their mouths, and now they are some of the biggest
(10:51):
players and one of the newest, most disruptive of tech industries.
But people started to take a closer look. They dipped
their fingers beneath the pr surface, and they found indications
of problems on the horizon. Quadriga did end up having employees,
one of whom was a hapless regulatory attorney. If you're listening,
(11:14):
shout out to you. The biggest problem that people noticed
immediately was that Cotton seemed to be functioning as sort
of a one man army. This one guy was running
the entirety of this gigantic exchange, this leviathan of an entity.
And also the company didn't have a lot of things
(11:36):
that these companies would be expected to have, like standard
accounting software or a way to not only track funds,
you know, in a transparent manner, but it didn't have
metrics against which to measure its own success. And I
love the point you brought up, Matt about the about
(11:58):
Mount Cox and Tokyo. If you wanted to cash out
from Quadriga, you had to physically meet in uh in
a location and take the funds in physical cash, So
like not getting that stuff wired to you. Yeah, like
a parking lot who doesn't like being able to make
(12:24):
a ton of money with a new investments? Right? But
if they've got eighty percent of Canada's crypto business and
there's only three people working for the company, who's meeting
them in the parking lot? Is it is literally one
of the three guys or four guys. Rather maybe it
was like a task rabbit situation. Sketchy, But remember we're
(12:46):
talking right, that's when we're really talking about race. So
not massive scale, not mad isn't like a massive number
even like the number of people that are into crypto
at this point it is probably maybe in the hundreds.
And just remember around that time we mentioned the silk road,
(13:07):
Bitcoin was being used for things that sometimes was being
used for things that you may want to operate more
on a cash system going in and out of it, right,
rather than having a bunch of things traced going into
a bank account, something like that, Right, beanie babies, POGs,
(13:28):
you know, vintage snapple, the kind of stuff you don't
want your friends knowing you're into. Yeah, um, but you're right,
you know, Uh, trafficking and drugs being a huge part
of that. That's what they were associated with in the
earlier days. This is this is something we have to
say this at first in Quadrigue's defense and in defense
(13:50):
of other companies in what Corporate America would call this space.
At this time, their hands were tied in the world
of banking because they could not, uh, they could not
conform to regulations, even even like a lot of banking
regulations end up being toothless at the top. You know
what I mean. If you are if you're reaching a
(14:12):
certain level of financial success, if the punishment for a
crime is a fee, then that is not a crime
for the people who can afford the fee. It's a
cost of doing business, and it's something that's unfortunately true
in many cases. I want to go back to what
you said, Matt, earlier. So Quadrico couldn't use these traditional
(14:37):
banking channels. They didn't have any business accounts because no
regulated bank, no normal bank would touch them. And this
was again a problem for similar outfits. So Quadrica used
other methods. They used what was called a platform credit system.
So like, um, let's say no, let's use you as
an example. You've got uh ten dollars and you put
(15:00):
ten dollars US or Canadian into this exchange. Um, let's
just say us for the sake of the example. When
you put in that ten bucks, you get what's called
ten Quadriga bucks, and you can trade the Quadriga bucks
on the exchange. It's almost like David Buster's money. Why
(15:21):
why do they have these shenanigans. Well, the problem is this,
If people are putting money into the platform and they're
buying bitcoins straight from there, that would mean that legally speaking,
Quadriga is a money transmitting entity. This alternative arrangement is
just them selling tokens, kind of like the way that
(15:41):
if you go to an art party or you go
somewhere without a liquor license, you can donate money and
they'll give you a you know, an award winning beer
like a PBR. This this feels like a very similar
thing to games that many of us probably play on
our phones, where you may buy from the game platform
(16:02):
tokens that can be exchanged for other things in a
weird way. You're never exchanging money for an actual thing
other than their tokens. I don't know, Yeah, not directly right. Yeah,
it's a it's a very it seems like a small,
weasily loophole, but it is an important one. It gets
(16:23):
stranger than that too. When customers wired money in the
funds did not go straight to Quadrica, they went through
a series of shell companies. Uh. These companies were meant
to kind of obscure things if they need to be obscured,
and most importantly, to avoid scrutiny of regulatory bodies. The
street name for this is, by the way, money laundry.
(16:47):
That's that's what it is. They used a lot of
they use a lot of processors. They also worked with
a big fish called Crypto Capital, which will come into
play later. But so far things are pretty exciting. Things
are on the up and up in the company starts
saying well, let's go public, and at this point still
(17:08):
the company is not quite you know, Trent Resiner is
basically nine inch nails. Uh. Cotton is pretty much in
the back end. He's pretty much Quadriga, but he is
still he still has support staff, he still is working
with Patron and making a move to go public. To
your earlier point and all about legitimacy in general, this
(17:30):
could be huge for the company because it's a stamp
of approval from the world of investors. But there was
another wrink goal By the end of UM, they were
not doing particularly well. They were operating at a loss,
the hefty loss ninety thod dollar Canadian dollar net loss um.
(17:50):
And it's a little tough to kind of take a
step back and see the whole view here because Quadriga's
accounting was really really add But Patron did seem to
think that there was a cash flow problem, and he
put a hundred and fifty k of his own money
in along with seven hundred K that they raised from
some other investors. And in March of that year, after
(18:12):
another round of publicly announced fundraising, Quadriga said that it
was ready to go public, but that never happened. Yes,
and this is a weird story, and it only gets
weirder from here. We're gonna take a quick break and
hear a word from our sponsors and we'll be right back.
(18:36):
We've returned. Yeah, and the company has like a functional
revenue of a little north of twenty dollars, So it's
not it's not like a particularly rosy uh. The issue
here is that the real picture of their net loss
versus gains or what have you is really tough to
(18:58):
see because that that accounting was not up to snuff.
So it's December, two rounds of fundraising, pretty lucrative rounds,
the company has burned through all of that new investment,
and Cotton pretty much fires everyone, including interestingly enough, their
regulatory attorney. Fast forward, Michael Patrion is also out. He
(19:23):
cuts ties with both Quadrigua as a company and with
Gerald's Cotton. Cotton is now fully Trent Resider nine inch
nail style on his own, but loneliness could be, you know,
a damaging thing for some human psyches. Cotton created a
dummy account on the exchange. He made a friend, this
(19:46):
friend's name Chris Markey, and Cotton again had had control
over the entirety of the back end. So what Cotton
did is he credited is new newly minted friend to
Chris Markey with a ton of fake money, and then
through Chris Markey, Cotton bought real bitcoin and he repeated
(20:07):
the process with etherium. Fast forward. He's doing this for
a while, he's moving wing. Cotton is essentially printing money
at this point, he's he's assigning his pal Chris of
fake value or a spoof value, and then using that
to purchase real crypto U and he's doing this to
(20:30):
in his extreme egregious degree. The Ontario Securities Commission will
later find that of trades on Quadrica are actually Chris
market trades. He's trading against his own customers. He created
a ponzi scheme. Is that like the robbing Peter to
pay Paul kind of situation? Yeah, very much so. A
(20:52):
ponzi scheme works as long as it has uninhibited growth.
And what you do is you you make these wild
promise is of profits far above the norm that an
investor would expect, and every time somebody pays into this,
you take the money that they have paid and you
give it to the folks who have been in the
game longer and are expecting returns. The problem is, if
(21:16):
you're like Ponsi, the namesake of this scheme. Then you're
you know, you're taking you're taking a taste at the
very minimum out of everything people are doing. Um. It
could be as something as small as like a transaction fee.
But in most cases it's not. Because Ponzi schemes are grifts,
they are scams. Uh, they're not sustainable. And also what
(21:37):
they need is a constantly presumably replenishing pool of funds
and unbridled access to it um and nobody thinking to
check on it, you know what I mean, Like either
you're like a money manager or something. UM. There would
be no indication, there would be no red flags for
someone to be like, oh my money is gone, um,
(21:58):
because as far as they're concerned, the money still they're
it's just being moved around. There's nothing earmarking who that
money belongs to. It's just part of the big pool,
right yeah. Yeah. The house of cards is falling around eighteen,
it's reaching the it's reaching the end of the typical
Ponzi scheme pattern, which means new deposits are directly being
(22:21):
used to fund withdrawals from more and more people saying, hey,
where's my money? What's the delay? And you can see
the forums where people are saying, well, the delay is
really on the Canadian banks. They're the bad guys. We're
trying to get this to you. And then Cotton smell
Cotton is um you didn't know about his past. You
(22:43):
would say Cotton has an extreme intuitive ability to sense
what's down the road here because he actually transfers some
of the money he's stole back into the exchange as
a stop gap as a band aid. And uh October,
he marries his longtime girlfriend, Jennifer Robertson que the music
(23:06):
Wonderful Things. Uh. Just a month later, and this is
something Matt you mentioned on that listener mail segment. He
makes a will and in his will he leaves all
of his assets, well, he leaves some to his dogs chihuahuas,
leaves all uh yeah seriously, yeah a d hunter k
(23:29):
And uh. Three days after signing this will, he and
his new bride traveled to India. It's the afternoon of
December eighteen. It's a little bit past five pm. Cotton
and Robertson land and ha Poor India, and they check
into a hotel named the Oberoi raj Villas. Cotton, according
(23:51):
to the story takes ill, and a day later, he
officially dies of complications from Crohn's disease. Uh he is.
Cause of death is listed as cardiac arrest. And depending
on which death certificate you read, he either died at
that hotel, or he died at a private hospital called
(24:14):
Fortis Escorts, or did he die at all. Here's where
it gets crazy. So notice, folks, we've used the word
allegedly and officially when describing Cotton's death in that earlier
Listener Male segment. We also hinted at this controversy through
(24:35):
through using these same terms. And the truth of the
matter is that many many people, not just burned customers
or victims of this outfit, they believe that Cotton may
have faked his death. Why why would you do that?
How would you do it? We've kind of already said
(24:56):
this uplement and established the fact that Cotton was in trouble.
He knew that not only local authorities, but the Feds.
We're circling him, they were sniffing around, they knew, they
knew something was up. And he's got all this money.
So like you can only imagine that, like if he
(25:19):
was if he wasn't already on the run by going
to India and having this marriage and honeymoon. Right. Uh,
he was gonna be on the run very soon after that,
or you can imagine him being prepared for that and
or preparing for it. But then there's just the cause
of his death in general, how it occurred and how
rapidly it came about. Right, Yeah, Cron's disease. For anybody unfamiliar,
(25:43):
we mentioned this previously, Crown's disease is a kind of
ib D inflammatory bowel disease, and it can be a real,
a real pain on multiple levels because it can give
you diarrhea, weight loss, fatigue, abdominal issues. It can lead
to malnutrition. But dying of Crohn's disease would be an
(26:08):
exceedingly rare event. Yeah. A good friend of mine I
grew up with lots of sleepovers and stuff like that.
Their mother had a brother's their mother had Crowns disease
and it was very manageable. It was painful when there
were flare ups, but it was the kind of thing
you take medication for your whole life, um, and it
(26:30):
would allow you to live a pretty normal, you know,
day to day life. It wasn't something that I witnessed,
you know, and I was over there a lot. I
never witnessed like some kind of crazy situation where there
was an episode of some kind. It was just something that,
you know, maybe she was tired that day or something.
But that was the usually the bulk of it. But
(26:50):
I've certainly never really heard of killing anybody, not to
not to say that it doesn't happen, but it is
possible maybe that he had a pre existing heart condition,
of that she was unaware, and that the flare up
of Crone's somehow, um somehow, in a dark, unenviable lottery
led to his unexpected death. It's possible. Again, But as
(27:13):
far as someone dying just from straight up Crown's disease,
the best we can say is that it is very
very rare. So as we were saying, many many people
don't think he actually died. Why, uh, yeah, it's he
had a motive, Like you said, Matt. He also he
also had some really sketchy stuff about his again official demise.
(27:37):
Local governments, not just in India but in different parts
of the world can and have been bribed for what
some people might find to be a surprisingly reasonable fee.
The story of Cotton's body gets pretty murky, to be
honest with you. From what we found, there was a
doctor at the Mahatma Gandhi Hospital who refused to sign
(28:01):
an embalming certificate on December ten, and Cotton's body was
taken to the SMS Medical College where the supervisor there
never actually saw the body. The embalming certificate was signed
and processed by a junior staffer. So we would say, okay,
(28:23):
find guys, I get it an embolving certificate that sounds
official and legit. But usually when people die there's a
death certificate. So what happened to that? And that the
first thing investigators would look at. Yeah, and they found two.
So they had doubled up on the death certificates. There
at least two out there. One list is place of
(28:44):
death as Forda's Hospital, but another one listed as that hotel.
Raj villis also the name on the death certificate for
the hotel, which was obtained by an outfit called coin desk. Uh.
The name is misspelled. Could be a clerical error, you
know what I mean, It's it's definitely possible or what
(29:06):
just like what's the alternative sloppy? Yeah? I think either
like sloppy and clerical error would be I think pretty
much the same. My question is, you know, if you're
looking for discrepancies, that's a discrepancy that pops out. You know,
that's one to to highlight. But what what would be
the advantage would he you know, would the plan be
if one was faking one's death to come back a
(29:29):
decade or so later and say, actually, that was a
different Michael Cotton who died nice try coppers. So wait,
so it's you know, his the official spelling of his
name is ce t T E N. Was was the
misspelling changing it to an? Oh? It was? I believe
it was a k oh Cotton with a K. So
(29:50):
maybe that was just the really extreme version of him,
you know, spells it with a K like X is
are in there somewhere. Actually it was Gerald Katar, brother
of former sn L actor Chris Katal. I guess all
I'm saying is that would be a pretty obvious ruse.
If you're gonna do it trying to be you know,
(30:10):
covert about it, you think you change the E well,
I mean you never know who filled it out? Well,
how much was you know, his wife involved in all
of this? There's some weirdness when you look at her
too and her activities. Because he passes away officially on
the eight. Then two days later she departs right she
(30:32):
she had takes off out of India, and she lets
the the orphanage know that that they were going to
do the charity work with and have that ceremony for
uh that she lets them go through an email that
she's not going to be there because she's got to
go back to Canada with her husband's unfortunately deceased body.
But I mean, I mean, the biggest red flag of
(30:53):
all here is the will, you know, making it that
close to the supposed demise of this individual. I mean
not to say that, you know, forward thinking young people
don't make wills in their thirties, but it's not certainly
not something that's top of mind, you know, especially when
you're living large, you know, like that. I mean, maybe
(31:16):
that's maybe it's the opposite, Maybe it's exactly that reason.
When I'm living large, there's something were to happen to me,
I would hate for my you know, funds to to disappear,
especially with crypto, where there's no real law governing it
or like how it's not the same uh laws, I
believe governing like you know, a bank account or or
property or something like that. So um, but still super
(31:37):
weird that it was just days mere days, and everything
just seems too explainable. You know. Oh, it's rare to
die from Crohn's disease, but you know, the co morbidity,
it certainly can happen. Um, it's a little unusual, but
it seems legit. Yeah, I mean, every everybody so far
has died at some point is kind one way ride,
(32:01):
unless you're Henrietta Lacks, And I don't think a lot
of people would envy that position. But but yeah, it's
a good point. Like did he get a vibe, did
he have some intuition that says, hey, I need to
button things up just in case maybe a twinge of
heart pain or something like that. Or was this part
of a plan? Uh? Yeah, that's the thing. We don't
(32:23):
want to unfairly disparage his his widow, especially, you know,
especially imagine the idea of of losing the person you
just married on your honeymoon. That's like that is that
is almost impossible for a lot of people to imagine,
or I hope it's almost impossible for a lot of
(32:45):
people to imagine and despite this grief, this enormous grief
beyond words, like you said, Matt, she's able to leave
the country. She's not only able to leave the country,
but she's able to return to Canada with her husband
and his body in a very short amount of time.
How do we know this. We know because on December four,
(33:06):
Cotton's remains were buried in a closed casket service in Canada.
Fast forward a month later, Jennifer Robertson announces her husband's
death to the world on January, meaning there was another
gap in time. There was a month before the customers
of Quadriga, the people following it had any real idea
(33:27):
of what was going on other than you know, they
were getting a lot of delays if they tried to
withdraw their funds. And around this time, people were no
longer able to take their money out of the exchange.
It was no longer a two way street. The company
in fact ceased operations, but people were still able to
put money in. And that money because you know, we
(33:49):
explained the stage the Ponzi scheme is at now, that
money was used to support the spoofed numbers that Quadriga
was was so deep into at this point, and then
if you fast forward to January thirty one, the company
finally announces bankruptcy. Gerald William Cotton Jerry to his friends,
(34:12):
had died. Most of the world agreed, and when he died,
he apparently took his passwords to his grave. Jus lease.
That is one thing they say in the crypto you
know sphere or whatever, they say, uh, not your code,
not your coins, something along the lines of that. So
(34:33):
there will be these key I'm sorry, not your keys,
not your coins. So in other words, if you've lost uh,
some unique identifying password or some random number generator thing
that like uh, you know, UM exchange like this or
like a you know, a wallet or a bank generates
either those are dead to you. Those coins they just
(34:54):
exist in the ether. U it's impossible to get to
because the whole point of the blockchain is is about encryption,
you know, it's all about UM protecting it from you know,
theft um. But that's why I was just sketchy from
the first place that the whole deal with this company
was only these four guys. They had too much access.
And apparently it wasn't the four it was really just Jerry, right,
(35:15):
And this is we know a lot of this because
of smet excellent investigative work. We also know about it
because of some work by regulatory bodies who went in
and really did some forensic accounting in uh in a
way that gets pretty disturbing. Will pause for word from
our sponsors, and when we return, we'll talk a little
(35:37):
bit more about the aftermath of Cotton's again official demise.
Show me the money, Jerry, Oh my god, I was
waiting for that one. Is that a movie reference? That
is right? Well, Jerry McGuire, Yeah, Jerry McGuire, he says,
(35:58):
show me the money. Cup of Gooding Jr. Says that, damon. Also,
you complete me o. Wait No, you had me at Hello.
You had me at Hello, You had me at Hello,
you had me at Crypto. So uh, that's one of
the questions when did this money go missing? Quadriga and
these things called cold wallets, And it turned out that
(36:20):
months before Cotton's official death, several of these wallets had
been emptied. They have been emptied. In fact, right around
the time one of their main processors, Crypto Capital, that
also crashed and burned. Their accounts were seized by government agents.
Can we can we talk about a cold wallet really fast. Yeah,
breakdown a cold wallet. It's like cold storage, right, It
(36:43):
is kind of like cold storage. It's a hard drive
that's not connected in any way to the network, the internet.
It's just your your stuff lives on that hard drive.
It's over there, nobody's touching it. It's secured while it's
physically secured. It's the kind of thing that if you
were going to protect your own stash and he didn't
have it on an exchange, because again, you're really they say,
(37:04):
don't keep your your stuff on an exchange, you could
literally put them on a hard drive yourself and put
that in a safe deposit box. Yes, but buy or
beware because you might find yourself in the unfortunate position
of that that guy who lost his hard drive, his
cold his cold wallet in a junkyard and currently I
(37:28):
think still I haven't checked on him in a while.
I think still had like an open reward for someone
to help him find it. It's an unenviable position. But yes,
those several of those appear to have been empty before
Cotton's demise, and later estimates from regulatory bodies concluded that
(37:49):
all told, there was twenty five thousand, six hundred missing bitcoins,
eleven thousand bitcoin cash, eleven thousand bitcoin cash, s V
four hundred and thirty thousand ethereum, and thirty five thousand
bitcoin gold. This may be gobbledegook to a lot of
people outside of the world of cryptocurrency, but the maybe
(38:10):
the best way to explain it is that as of
around March or March February of that adds up to
something like one eight five billion dollars. And this is
in twenty valuation, So I mean, you know, a bitcoin
today I think is worth what like sixty five grands. Yeah,
(38:30):
that's what I'm saying. Like, as of around February March
of this year, that total would add up to like
one that today. Got it perfect, And now, with great
interest in delight, I propose that we turned to the
story of Michael Patrick, because, as you may have noticed,
fellow conspiracy realists, we were taking pains to say he
(38:52):
was going by that name at the time, or he
calls himself that now, his original name is not Michael Patrick,
it is Omar to Nanny. Yeah, Michael Patrick already kind
of sounds like a made up name, doesn't it. Um
he changed his name at least twice that we know of.
He was, in fact, a convicted felon who worked with
UH an identity theft ring known as the Shadow Crew.
(39:15):
Um and Patron and Cotton almost certainly knew each other
well before their venture with Quadriga, and to me, this
already implies that Cotton likely knew about this the Shadow Crew.
He seems like the type. Again. Remember that all those
gaps we were talking about, right, is that your theory? Ben?
(39:36):
I don't want to scoop you on that. You talked
about the theory about how he was, how they were
putting together the scratch for this, you know, supposedly more
above board venture with Quadriga. You think it was from
stealing identities and just like like doing something. Dude, we're
gonna talking about this, and Ben's gonna hit you it's crazy.
They're they were doing so much stuff when they were
younger people. Yeah, well there's all that time. Yea, Well,
(39:58):
let's those little I'm sorry, I'm just my mind is spinning,
um right, yeah, keep it spinning, man. Yeah, We're we're
gonna we're gonna spin our own heads here exorcist style. Uh,
and we're gonna do it with the help of two people,
a Reddit user named q c x I and T,
and some excellent research by Amy Castor Like Castor Oil,
(40:20):
they found strong indications just what you're saying, the Cotton
and Patron were active in Ponzi schemes earlier, different new,
different older iterations kind of harbingers what would become Quadrica Castor.
In fact, Tracey's Cotton's criminal career all the way back
to the tender age of fifteen, when a lot of
(40:42):
people in the US were like stressed about getting their
learner's license. This guy was learning how to puppeteer financial
things on a on a macro scale. That's insane. Can
I ask a quick question, um, what the thing that
makes a Ponzi scheme illegal? Is the fact that you
are toying with other people's funds in ventures that they
(41:05):
are not aware of that are very risky in the
hopes of reaping high yield rewards. Or Am I missing something?
Because I mean that's what a money manager does. But
usually you have an understanding of the types of risk
or the levels of risk that your your money managers
gonna take with your money, and you sort of determine
that is this a the fact that they don't know
(41:27):
that the money is being moved around. I mean, presumably
they want their money to grow. I mean, can you
maybe just explain that, Ben or or Matt, uh what
what part of it makes it illegal? Because on its surface,
it's got the shell of legitimacy. I mean, I can
tell you a little bit just my understanding of these
h y I P is a right high and high
(41:49):
yield investment programs. Yes, okay, so yeah, I mean these babies,
these babies are they're just or ripe. If you're a
smart person, you can set up some like legit sounding names.
You can do some interesting stuff. And the work of
Amy castor there and that Reddit user, they really look
(42:11):
into some of the stuff that Cott was doing back
when he was fifteen years old. And you can also
look at that Vanity Fair article we talked about there
where they discussed like some some things that they did, like, uh,
Jerry set up stuff when he was a kid at
his parents computer that took people's money and then exited
(42:32):
with those people's money and just shut the thing down.
And he was communicating with this Michael Patron guy before
he was Michael Patriot. I guess I don't know, I
don't know if it was before he was Michael Patron
or not. Uh, but they would communicate it on this
place called talk Gold, which was a place where they
could exchange information and basically prop each other up and
(42:52):
support each other. Yeah, exactly, And he gave in the
in the kind of if I can explain it in
cinematic terms, here is why ponzi schemes are illegal. Here's
why pyramid schemes are illegal. First, they're unsustainable. But the
truth of the matter is that they ultimately cannot expand
beyond the size of the population of planet Earth and
(43:17):
to be successful forever without falling apart, they have to
eventually expand past that threshold. Now, with the emergence of AI,
could there be you know, unending ponzi scheme. Maybe it
depends on how quickly you can mint new sentience. Right
but right now with meat bags, Yeah, that's why it
breaks down because of the math, uh, and the idea
(43:39):
of that growth. But to the growth is the that's
a red flag. If you're you're airring into a situation
where growth is promised, you know, that should be a
red flag. Like this is probably not something that's real,
but the interesting thing is like nowadays there are these
crypto projects, you know, where you get these tokens or
these like coin pairs where you can get like you meant,
(44:00):
a new token by pairing a coin like a finance
coin or or uh bitcoin with a token of these projects,
and they do promise a hundred percent yield um and
if you watch them over time, it's called yield farming.
It's this whole thing and and and again it is
right for exploitation. And we had a story of the
(44:21):
day about this rug pool situation where with the uber
or crypto eats. So this is way pre that. But
those things do exist today, still very much in the
crypto space. They're just not uh necessarily on the more
legitimate exchanges. This would have been a wild West period
of exchanges too, you know, as evidenced by the whole
meet me in the parking lot to get your money. Um.
(44:42):
It's fascinating stuff. Yeah. Yeah. And also I guess if
you want to be less cinematic and more technical. Uh.
The reason a ponzi scheme is illegal is because the
money that's paid to the ponzi investors is described as income,
but it's not income. It's a distribution of capital. So
they're just moving the money around, pretending that that money
(45:06):
is coming from some sort of profit, which it is not.
And that's my last question is that they're until they're
inherent in this model, there is no profit. I mean,
I assume the value of the coins being invested grow
along with the market, but this fund or whatever isn't
actually doing anything at all to other than moving the
(45:28):
funds around to pay this fake dividend to the older
investors using the newer investors money, and then eventually it
just catches up right, Yeah, yeah, I mean it's tremendously
profitable for the person running the grift or the people,
but maybe not so much for the customers. So we
know a little bit about how Patron made a name
(45:48):
for himself because these guys, in terms of criminal activity,
they were peanut Butter and Kelly too great taste that
tastes great together. Uh. Patron. Patron started out, as far
as people can tell, by helping helping others launder money
through a mixing program. You mix it in a token
(46:08):
scheme called e gold, and then later you would be
able to get your money out for a reasonable fee
and your money would be clean Uh, the honey ultimately
gets deported as a result of his conviction for identity
fraud slash theft with the Shadow Crew, and then he
and Cotton appear to have teamed up for another operation
(46:30):
using the Midas Gold Exchange or sometimes called m Gold
Exchange in two thousand and eight, and they were big
piece of what they were doing. Here was a pre
bitcoin digital currency called Liberty Reserve, and you can imagine
it came with some political leanings. It was. It was
like imagine, um, so just like an earlier example right
(46:51):
no where we had, you buy one Quadriga buck or
ten Quadrica bucks. One dollar is equal to one Liberty
Reserve token basically, and you can send that token to
anyone else anywhere on the network with you know, a
little big, a small taste going to Liberty Reserve itself
(47:13):
into as a transaction fee. Imagine a PayPal that doesn't
need you to verify your identity. Huh. You can already
see the potential, right, folks. You can already hear the
illegal money, uh just pouring in you. Also, all you
need is an email address, and there are plenty of
ways to get around email address stuff, or at least
(47:35):
there there were at this time. It's probably a little
tougher now. This company, Liberty Reserve, it grew to more
than a million users before it was shut down in
and regulators at the time called it the largest money
laundering scheme in US history. They were actually able to
do this because of the Patriot Act, which gave them
(47:57):
powers They wouldn't ordinarily have to, um, you know, to
connect this with possible terrorism or drug drug running through
the trade of US currency abroad. But it was found
basically be funding that, right, those exchanges were funding trafficking
of drugs and other things and terrorism at least in
(48:18):
the um overall Liberty Reserve and MIGHTUS gold Exchange. Yeah, yeah, Oh,
they weren't framed, Make no mistakes. It wasn't a stitch
up job. But it goes deeper than that, because at
the same time the same gear Liberty Reserve is shut down,
Cotton and Patron founded Quadriga, And it goes deeper than that,
(48:40):
Like dead pres says, it's deeper than wrap. It appears
that Cotton and Patron had been, as you said, Matt,
interacting on several other schemes through other forums, things like
black hat World, and as you mentioned talk gold, and
later investigations linked several handles to both men um In
Cotton's case, one was Scepter and the other was Murdoch
(49:03):
leet or you know, for people who don't use lead speak,
Murdoch one three three seven. Interestingly enough, Murdoch one three
three seven was active in August of nineteen months after
Cotton officially died. So you think that's him. Yeah, so
people who people who believe that he successfully faked his
(49:26):
death will point to that as evidence of his activity.
But again, with the anonymity of the Internet for most people,
is it possible that somebody else was just you know,
just had his log in. That's definitely associated with him,
like and for real okay, got it? Oh, yes, for real, Yeah,
it's associated with him. If you want to learn more
(49:46):
about that again, go to UH search for Amy Castor's
work on it, which does does a great and thorough
job of of linking these together. And also Honorable mentioned
to Crypto Capital mentioned them as one of the big processors.
Their president was a guy named Ivan Manuel Molina Lee.
(50:09):
I don't know if you have heard of him in
the news, folks, but he was most recently in the
news because he was arrested in Poland in twenty nineteen
in connection with money laundering being part of an international
drug cartel. And if you look at the if you
(50:30):
look at the charges against him, he apparently is also
charged and cover up to hide the loss of eight
hundred and fifty million dollars in client and corporate funds. Yeah. Yeah,
So this example I think is important because we don't know,
we're being the public, don't know how deep these things go.
(50:53):
We don't know how much money is actually being moved around,
and we don't know how these folks are or are
not really did to each other in the world of crypto. Yeah,
it's fascinating to I think I said this one. We
did the story in Strange News or listener mail rather. Um,
I don't know that we've still yet have like a
public sense of who the big crypto mafioso's are, you know,
(51:16):
who who the big players in the in the in
the crime world associated with crypto r um because even this,
you know, UM, Jerry cotton Fellow very much not a
household name. We all admitted that and didn't know about
until we heard about this um not Netflix documentary that
was coming up and this guy Ivan Manuel Molina Lee.
(51:37):
I mean, he's accused of laundering tons and tons of
money for international drug cartels using this crypto um format
called bit fine x um, which is run by the
same company who created something called tether, which is a
one to one US D kind of um uh substitute.
(51:58):
You know, it's it's it's it's peg to the US dollar.
So it's a way that I believe crypto people can like,
you know, pay for things using tether because it's like
not the same value as a dollar um one to one.
And again I'm not an expert of it. I just
kind of you know, know, it has to be dangerous,
but tether is very popular and it's something that's very like,
(52:19):
you know, household and then at least in the crypto community.
So for that company to be associated with this guy,
I mean, what else is there? You know, who is
the Toshi Nakamoto? Right, No one officially knows um, but
when there are, there are a couple of leads of
very incredibility, right or very implausibility. Yeah, I think this
is this is an excellent example. Um. The world is
(52:42):
not entirely aware of how deep the rabbit hole goes here.
This is a renaissance of money laundry at the very least,
you know what I mean. These are the glory days. Uh,
that's what future financial criminals may well call them. So
where are we act currently? As we said, it was
without saying that not everyone believes Gerald William Cotton has
(53:04):
actually left the building. As a matter of fact, lawyers
had been pushing to have his his again official grave exhumed. Uh.
This is a request that Canadian authorities have so far denied.
The Netflix documentary we mentioned at the top, Trust No One,
The Hunt for the Crypto King, premieres in and it
(53:26):
plans to investigate the case following the built investors who
are searching for and I think us equivalent twenty two
d seventeen million dollars that Cotton himself is believed to
have absconded with. But not everybody agrees. You'll find a
lot of people who believe, yes, Cotton was a thief.
(53:47):
Maybe he was even addicted to the thrill of scamming. Uh.
But they're kind of but they don't buy into the
theories that he could have faked his death. Instead, they're saying, yeah,
he was the thief and he also genuinely passed away
unexpectedly on his honeymoon in India. And the thing you
can say in the favor of folks holding that view
(54:08):
is that it is incredibly difficult to commit pseudo side
in a sustainable way. For further reading, checkout Elizabeth Greenwood's
awesome book Playing Dead. Uh. And they're also two great
podcast we wanted to recommend that our deep dives into
this story. One of the first is Exit Scam and
(54:29):
that what's the uh what's the name of that second
one that we were tuning into. It's a CBC podcast
is called a Death in Crypto Land. Yeah. Yeah, and
they're they're good listens. Check them out. I mean to
be fully transparent. You know they're not. Um. This is
not us plugging a podcast for anything other than the
(54:49):
substance of it, especially if you're interested in this story.
As far as the officials are concerned, the case of
the death is pretty much closed. But again a lot
of people who lost a lot of money are convinced
there's more to this story. At this point, I have
to ask you guys before we wrap that. Noel fellow
(55:13):
conspiracy realist tuning in, what do you think is cotton alive,
Cotton passed beyond this mortal veil. I think he did it.
I think he's one of the few success stories of
being able to properly do this, because again, part of
the crypto thing is like it being untraceable. We're not untraceable,
but like you know, if you know the right people,
(55:35):
you can spend that money um without tipping off the
I R s and live off the grid, a different grid,
but but off the main grid. If he is truly
the genius guy than many believe he is, he did
some things that would lead me to believe he faked
his death. He got that cessna, he was getting his
(55:58):
pilot slice as yours I need to fly. He got
a boat, a yacht that he could you know, learned
how to pilot that thing or two drive that thing?
What he uh? He also that that yacht is also
highly customized in a way that could allow someone if
they if they are lucky, avoiding detection. It could allow
(56:20):
someone to travel internationally without all those pesky border regulations. Yeah,
but he his wife tried to sell it immediately after
he died. Right. What what I'm thinking is he learned
the skills to be able to fly and to you know,
drive a boat, like he knows how to do this now.
(56:41):
And if he's got enough of this money in cash form,
then he's traveling around the world. He can make use
of it and travel between countries, perhaps in a more
quiet manner. Uh. He also allegedly was traveling around the world,
perhaps allegedly leaving money in various accounts. Again, if you
(57:02):
believe that, that's part of the Mastermind story, like you
believe him to be a Mastermind criminal, I don't know.
I'm certainly intrigued by the whole thing. And if you're
as intrigued as I am, like, like we said, there's
stuff for you to check out, to continue down the
rabbit hole. If you want to reach out to us
and tell us what you think, you can find us
all over the internet, boy, can't you. Ever, We don't
(57:24):
make it hard at all to find us. He can
find us on Facebook, you can find us on Twitter,
you can find us on YouTube at the handle Conspiracy Stuff.
We're also at the Conspiracy Stuff show on Instagram. And
if you don't want to get on the internet at all,
why not to pick up a telephone give us a
call using your hands and mouths yes. So number is
one eight three three std w y t K. When
(57:45):
you call in, give yourself a cool nickname. You've got
three minutes to say whatever you'd like. If you've got
more that you'd like to send to us that can't
fit into those three minutes, we highly recommend you instead
send us a good old fashioned email. We are conspiracy
at i heart rate dot com. Stuff they don't want
(58:21):
you to know is a production of I heart Radio.
For more podcasts from my heart Radio, visit the i
heart Radio app, Apple Podcasts, or wherever you listen to
your favorite shows.
Stuff They Don't Want You To Know News
Hosts And Creators
Matt Frederick
Ben Bowlin
Noel Brown
Show Links
RSSStoreAboutLive ShowsPopular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.