The recent death of the CEO of QuadrigaCX, a major cryptocurrency exchange in Canada, demonstrates a basic, yet
often-overlooked, tenet of effective estate planning:
In the event of your incapacity or death, if your heirs don’t know how to find or access your assets, those assets are as good as gone. Indeed, it’s as if they never existed at all.
While it might not be that big of a deal if the assets in question aren’t worth much money, in the case of QuadrigaCX’s Gerald Cotten, the lost assets were worth $145 million—the vast majority of the company’s crypto holdings.
This hefty sum effectively vanished after Cotten died without leaving instructions for how to access the digital currency’s security passcodes. The crypto holdings were owned by some 115,000 clients, who used the exchange to buy and store their digital coins.
An untimely death and a cold wallet
Cotten, age 30, died suddenly of complications related to Crohn’s disease while traveling in India during December 2018. In January 2019, QuardigaCX filed for bankruptcy to protect itself from creditors, including all of the customers with crypto stored in its electronic vault.
Ironically, the digital assets were lost in part because Cotten followed a well-known security practice designed to safeguard the funds. Most of the company’s crypto holdings were stored in a “cold wallet,” or one that isn’t connected to the Internet. The use of a cold wallet is standard practice, since “hot wallets,” or those connected to the internet, are frequently hacked.
This would’ve typically been a prudent measure, but Cotten reportedly stored the cold wallet on an encrypted laptop that only he knew how to get into.
According to Cotten’s widow, Jennifer Roberston, following multiple searches, she has been unable to find the passwords to open the laptop and gain access to the company’s cold wallet. QuadrigaCX even brought in IT experts to get into Cotten’s laptop, but so far, all attempts have been unsuccessful.
Incomplete estate planning
Upon first glance, Cotten was fairly diligent in his estate planning. He named Roberston as his estate’s executor and left her instructions for the complete distribution of his assets, including a private jet and multiple properties in Canada.
He even left behind $100,000 for the care of his two dogs. Yet he managed to forget to include the passcodes that would unlock his company’s vast crypto assets. We believe that most people holding crypto assets haven’t taken the proper steps to ensure their heirs will know how to access these assets upon their incapacity or death.
What makes this loss so tragic is that it could have been so easily avoided. Whether your estate is valued in millions or thousands, your plan must include a comprehensive inventory of your assets. And as Cotten’s case shows, this inventory must include detailed instructions for how to locate and access every asset, especially digital ones with tight security protections.
This kind of comprehensive inventory is standard in every estate plan we create. As your Personal Family Lawyer®, you can rest assured that in the event of your death or incapacity, all of your assets will remain safe and easily accessible. Contact us today.