'I'm a pretty bad investor': This Canadian lost $400K US when crypto CEO Gerald Cotten died

First introduced in 2009, bitcoin is a digital currency that can be purchased, traded and sold without a middle man like a central bank. It was the first of thousands of cryptocurrencies that sprung up when the 2008 financial crisis caused a loss of confidence in traditional banking. 

Some investors saw cryptocurrency as a way to avoid banking fees, regulations and borders. By 2017, bitcoin exploded as its price climbed from below $1,000 to nearly $20,000. 

Canadian Tong Zou was living in San Francisco at the time and was watching his friends get rich. "As humans often do, we get greedy and we get selfish. And I was jealous of my friends for making so much money," he says. He took out three bank loans and invested them all in cryptocurrency. 

Shortly afterward, in January 2018, the crypto market nosedived, leaving Zou struggling to pay his debts. He was planning to move back to Canada and put his condo up for sale to cover his losses. But that's when the trouble really started.

Zou is featured in Dead Man's Switch: a crypto mystery, a new CBC documentary. 

After paying his debts, Zou was left with approximately $400,000 US, which he wanted to convert into Canadian dollars and take home. Banks were charging a one to two per cent commission, says Zou, so he put his money into an account at QuadrigaCX, a Canadian cryptocurrency exchange. "This is what I thought cryptocurrency was invented to do ... to easily move money between different places," he says. "But I was basically gambling with my money."

QuadrigaCX was owned by Gerald Cotten, a 30-year-old internet whiz kid who cofounded the exchange in 2013. The public face of cryptocurrency in Canada, he saw himself as a disruptor who challenged conventional banking. And he grew fabulously rich while doing it, acquiring a 50-foot yacht and an airplane, and travelling the world on luxury holidays. 

But by 2018, when the cryptocurrency bubble burst, there were signs of trouble at QuadrigaCX. Some customers were waiting months for their withdrawal requests to be processed and word had started to spread. As more investors attempted to pull their cash out, Cotten had less money to pay out the requests.

Then came the most shocking news. On Jan. 14, 2019, the company announced that Cotten had died while on his honeymoon in India — more than a month prior. It was then revealed that he was the only key holder with access to customers' money. An estimated $250 million in cryptocurrency was locked on his personal laptop — and nobody knew the password. Over 100,000 people stood to lose their money, some who had a considerable amount on the exchange, like Zou. "I was just wondering like, wow, this really happened to me. Unbelievable," he says.

This was certainly not the normal way of running a currency exchange and investors began to suspect foul play — that Cotten had faked his death to escape with what was left of QuadrigaCX's holdings.

Theories abound about what happened to Cotten, and some creditors have pressured the RCMP, who are investigating the matter, to exhume his body and prove he's dead. "I'm 80 per cent sure he's dead," says Zou. "It just doesn't make sense to disappear when he was at the bottom."  

As for his losses, Zou learned a few years later that he'll be recouping about 16 per cent of his investment, but he hasn't seen any of the money yet. "I'm a bad investor — I'm not afraid to say it. I'm a pretty bad investor," says Zou. "Hindsight is 20/20. You should only invest what you can afford to lose."

Watch  Dead Man's Switch: a crypto mystery now streaming on CBC Gem.