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“Did you try ‘password’?”

On Behalf of | Feb 7, 2019 | Blog

We’ve previously written about cryptocurrency’s penchant for being an enigma. On the one hand, it is regulated like other investments; on the other hand, it has been linked to illegal activities and is considered a risky investment by many. 

A story reported earlier this month provides another example of the potential risks to cryptocurrency investors. 

Canadian cryptocurrency exchange QuadrigaCX says it is unable to repay nearly $190 million in client holdings because they no longer have the passwords for its “cold storage”. Yes, you read that right: lost passwords are holding up over $190 million in payments to cryptocurrency investors. 

As reported by Coindesk, the exchange’s founder died unexpectedly in December and was the only person who knew the passwords. 

A customer in Calgary told CBC that “this is a tough lesson learned” and “I would probably avoid cryptocurrency in the future.” (Source: “Crypto Exchange Says It Can’t Repay $190 Million to Clients After Founder Dies With Only Password”, Gizmodo)

Can this really happen? 

It appears so. According to The Verge, “if the company has indeed placed its cryptocurrency in a now-inaccessible device, it seems likely that thousands of users will never be able to recover their funds. 

If you are considering investing in cryptocurrency, it is wise to consider using a broker who will bear this risk on their end or, even better, make sure you are investing with an exchange that has a contingency plan that prevents passwords from being taken to the grave. An experienced attorney can help you make sure you are legally protected from the pitfalls of cryptocurrency investment.