Software Engineer Loses Life Savings in Quadriga Imbroglio (bloomberg.com)

Tong Zou wasn't a stereotypical crypto bro bent on accumulating flashy trophies such as Lamborghinis when he deposited his life savings into Quadriga CX's digital exchange. The 30-year-old software engineer, who'd been working in California for seven years, just wanted to save a few bucks on transfer fees after deciding to move to Vancouver. It proved to be a C$560,000 ($422,000) mistake. From a report: "It's all my savings, so I'm just living on what little I have left and trying to start over," Zou said in a phone interview Friday from Vancouver, where he has been living out of an AirBnB for the past month. "It pretty much took everything away from me." Zou is one of Quadriga's 115,000 clients who are out of luck after the sudden death of the firm's founder left C$190 million in cryptocurrencies protected by his passwords unretrievable. The exchange has halted operations and was granted protection from creditors on Feb. 5 in Nova Scotia Supreme Court in Halifax.

Comments

Diversify your investment portfolio

[alvinrod]

It doesn't matter what you're doing, but there is an old saying about not keeping all of your eggs in one basket. Sometimes even incredibly intelligent people are capable of horrible foolishness.

Re:Diversify your investment portfolio

[alvinrod]

That's right but not relevant here. He wasn't do that not as an investment but as a temporary solution to an international move.

It doesn't matter what you're doing. When I travel internationally, I never keep all of my cash in one location. Even though it's obviously not all of my assets, I try to make sure that no single adverse event leaves me up shit creek without a paddle. Same reasoning applies to important information, like your data, or the ability to access that data which is why this is a problem for more than just this one poor fool. It doesn't matter what the situation is, never have a single point of failure.

Re:Diversify your investment portfolio

[ibpooks]

Perhaps they aren't actually ripping you off on those fees... Maybe, just maybe, you're paying for the reliability and trustworthiness of a real financial institution. You know, the kind with backups and professionals and legal oversight.

The real headline is "Chump tries to smuggle $500k across an international border, gets burned".

Re:Diversify your investment portfolio

[pz]

Same reasoning applies to important information,

The same reasoning applies to any enterprise or engineering design that has robustness as a requirement: vigorously avoid single points of failure.

Tax evasion?

[Anonymous Coward]

Because that sure sounds like a possibility. While he can't get the money back now, I hope the IRS and the Canadian equivalent are looking at this closely, since this is INTERNATIONAL commerce, not just interstate commerce, and deserves all the scrutiny it can get so people understand the consequences of flaunting the rules.

Losing the money is bad, but having it publicized you were dodging taxes while fleeing the country in the process....

So, trying to understand

[forkfail]

He used this cryptocurrency in an attempt to get around the laws and banking regulations of the US and Canada, and now we're supposed to feel sorry for him?

I mean, it's always sad when folks lose everything. But it's not like this guy was particularly innocent in what he was doing.

Re:So, trying to understand

[ddtmm]

What was illegal about it? He purchased crypto with USD, then was going to sell it in CAD. That's perfectly legal and is a method used in buying/selling foreign stocks.

Re:So, trying to understand

[Anonymous Coward]

no, he's a dumb ass for moving half a million in one transaction.

Re:So, trying to understand

[bradley13]

You're perfectly right, if that is what he intended.\

His is a strange story. He says he wanted to just use the exchange to transfer his money - all $500,000 at once. That's a really strange choice: he is going through a third currency, meaning two transactions rather than one. The fees are going to be much higher than just an ordinary bank-to-bank transfer, plus that third currency is extremely volatile, meaning he has a lot of additional risk.

Then we have the "all your eggs in one basket" argument. With a traditional bank, that might not be a problem, but with an exchange? After Mt. Gox anyone in the IT world should understand that exchanges cannot be trusted. Multiple transactions, waiting for each one to go through before initiating the next. Or multiple exchanges. Or just leave his money in the US. Or his own offline wallet. Or, really, anything except what he actually did.

tl;dr: His story doesn't pass the sniff-test. I'm not sure what he was really doing, but it seems very likely that he was trying to bypass official notice of the assets - either their departure from the US, or their arrival in Canada. I wonder: did he make this money with crypto-speculation? And, perhaps, had never paid taxes on it?

OTOH: reality sometimes is stranger than fiction, and sometimes people really do just have brain farts...

Re:So, trying to understand

[darkmeridian]

But why didn't he just ACH his money directly from one bank account to another? Or write himself a check? As far as I know, those are both very low cost or no cost if they really want your business.

On the bright side

[Waffle Iron]

At least he avoided losing his life savings because of a collapse of the global banking system.

Re: Sterotype much?

[Anonymous Coward]

Hm, maybe fully deregulated commodities managed by a bunch of idiot tech bros was a bad idea?

Cryptocurrency is like a history lesson

[Kethinov]

I love how cryptocurrency is like a history lesson for Libertarians with regressive economic attitudes. They get to learn the hard way why each discrete financial regulation we have today was enacted.

He didn't say "investment"

[SuperKendall]

That's right but not relevant here. He wasn't do that not as an investment

It's incredibly relevant - he literally took all his eggs (money) and put them in one basket (Enquadrdriofomaligo or whatever it was called).

It doesn't matter if the purpose was investment or short term transfer.

Same reason why when traveling you would not get a bunch of travelers checks and keep them all in the same place. (not that anyone uses travelers checks anymore, but still).

He was moving to Canada from the US and wanted to save money on conversion fees

Unstated: also wanted to avoid Canadian taxes on said money.... and he paid the ultimate conversion fee instead.

It's not that I don't feel somewhat sorry for him, but I think he was way more foolish than unlucky. "unlucky" is almost always just another way to say "didn't really think through possibilities".

Re:He didn't say "investment"

[SuperKendall]

P.S. - Ok, the subject of his post did say investment. But my point remains that you should not pull all of your eggs in any one basket, for any duration.

Re:He didn't say "investment"

[mattyj]

More succinctly, you shouldn't put all your eggs in a basket with no bottom.

Re:He didn't say "investment"

[DontBeAMoran]

...just another way to say "didn't really think through possibilities"

Any software engineer worthy of his title should have thought about that possibility.

Re:He didn't say "investment"

[DontBeAMoran]

More to the point, never buy eggs because they're too fragile.

Re:He didn't say "investment"

[epine]

Its pretty common to put your life savings with one bank or brokerage firm.

When you buy a share through a brokerage account, do you own the underlying share, or does your broker own the underlying share, upon said institution you lay claim to your just portion as some kind of common creditor?

I suspect that's a distinction with a difference.

Also, in a conventional bank, the cash portion is often highly insured by the Great Revenue Service of the Public Good (precisely the institution this clown was attempting to shirk by hopping aboard an underground railway through the Great Digital Wild West).

Re:He didn't say "investment"

[Solandri]

Unstated: also wanted to avoid Canadian taxes on said money....

Canada taxes based on where you live. He was a Canadian citizen living in the U.S., so not subject to Canadian taxes on the money he earned while living in the U.S. I have several Canadian friends who work in the U.S. They have to be careful to monitor the time they spend visiting Canada on vacations and such. If they began (or ended) work in the U.S. partway through the year, and their visits to Canada push them over 183 days in Canada for the year, suddenly they are a Canadian resident for the year and owe Canadian taxes on everything they made. The U.S. taxes the money anyway since it was earned in the U.S.

I went through the reverse situation (U.S. citizen working in Canada). The U.S. taxes not just based on where you earned the money, but also on citizenship. So I was subject to double-taxation. Canada taxed my income because my job was in Canada. The U.S. taxed my income because I was a U.S. citizen. The two countries have a tax treaty so I only paid the greater of the two income taxes on my wages. But the treaty only covered earned income (you can apply your Canadian earned income tax bill as a credit to your U.S. earned income tax bill). If I had lived in Canada, any unearned income - interest from a savings account, investments, sales of stock which had appreciated, etc - would've been subject to double taxation. Both countries would've made me pay taxes on it. So I ended up living just across the border in the U.S. and commuted to work in Canada, and telecommuted often enough so I never passed 183 days per year in Canada.

California was another small nightmare. California taxes based on citizenship as well, and will still try to claim you are a California citizen (resident) even if you move to another country, and will try to make you pay California taxes on everything you make abroad. To thwart them, you first have to set up residency in another state before you move abroad. Preferably a state with no income taxes so they don't try to pull the same thing. So even if I had decided to live in Canada, I would've first had to have lived in Washington state long enough to get a driver's license there to officially shed my California residency.

The fees actually aren't your biggest concern. Exchange rates are always fluctuating. When I moved most of my Canadian funds back to the U.S., I did it a little at a time over a span of a couple months. If I had transferred it all at once, I could've lost a lot of money to a transient blip in the exchange rate. That happened to the owner of the company I was working at. He panicked when the U.S. Dollar began falling in Sept-Oct 2007 and converted all of the company's U.S. funds to Canadian in early November 2007. That happened to be

Re:He didn't say "investment"

[vux984]

"Its pretty common to put your life savings with one bank or brokerage firm."

And there's a good reason people trust banks. They are pretty heavily regulated and insured, and they don't go belly up with everyones money gone when someone in management turns into a crook or corpse.

"The crypto would have been better off in a personal hardware wallet: providing he took proper precautions"

Really it would not. The proper precautions are pretty involved. You need to contend with everyhting from a power supply failure to a mugging to the possibility you have cryptocurrency stealing malware on your device to your own poorly timed heart attack. (not so much for yourself on that last one but for your family).

And you'd STILL need to break up the transaction into a bunch of smaller ones and use multiple wallets because you can't easily avoid single points of failure and the only reasonable mitigation is to do it in $10k chunks or something so if something goes horribly wrong at just the wrong time you are only out $10k.

" I'm sure someone who is a software developer could easily figure out how to manage that."

Right, because robust backups AND private key management are both easy, and software developers rarely fuck these up. Thanks for the lulz.

Re:30 years old?

[fat man's underwear]

How do you figure? He got a job at age 23 that allowed him to put aside 60K a year in the most expensive area in the US?

He must have been making 150000 to 200000 a year before taxes right after college and lived in a trailer. Humbly. ...and then he plowed everything into a risky crypto-currency?

No, sorry, it doesn't add up.

Re:If you don't hold your own keys,

[Anonymous Coward]

He wasn't letting his crypto sit on QuadrigaCX, and likely didn't have it there as crypto for any more than a few minutes. He wanted QuadrigaCX's crypto$$$ exchanges to help him buy the crypto with USD (he either deposited USD into QuadrigaCX, or first purchased crypto using USD elsewhere which he then transferred to QuadrigaCX), and sell it for CAD.. and then the idea was that QuadrigaCX would transfer his CAD (as a 'withdrawal' from QuadrigaCX) to his CAD bank account. I didn't read this particular article.. but a lot of people used QuadrigaCX specifically to convert cryptoCAD through its exchange/market. It's been assumed to be dicey for over a year though, since their withdrawals began to often take upwards of 2 months. His withdrawal, rather than just being horribly delayed, never came.

sounds like tax avoidance

[hdyoung]

I'm not sure "saving on fees" was the real motivation here. Tax avoidance sounds a lot more likely. In any case, ouch. Note to all 30 year olds: just because you're smart in one area doesn't mean you're master of all. Be careful. What you don't know CAN hurt you. Hard lesson to learn but I'm not sure which lesson is relevant here.

If the guy was just trying to save bank fees, then the lesson is "banks exist and charge fees for a reason and now you know why".

If he was trying to avoid taxes, the lesson is "you want to operate outside the law you better be ready for the wild, wild west, baby!".

Re:Not your keys?

[Anonymous Coward]

Another thing is that QuadrigaCX by that point was known to sometimes take more than 2 months for a fiat currency withdrawal. So he went from USD to crypto to CAD in an attempt to save 2%.. but risks aside, he was looking at potentially leaving that $560,000 sitting with no means to invest it for 2 months. For someone knowledgeable to do such a thing, it would seem to me to really require a great distaste for allowing the banking system to take a cut (either that.. or if he chose to have the currency delivered to him as cash rather than wire transfer, then I suppose perhaps he was trying to hide the movement of money). The way I look at, I tend to have sympathy for whomever makes a mistake the first time.. and perhaps it was his first serious use of QuadrigaCX (and thus he wouldn't have known of the stress of waiting for a large amount to come through from them, with unknown timeline).

Re:Sterotype much?

[sinij]

How about some consistency in your outrage? If sexism is bad, then all forms of it are bad?

Re:hmm

[Anonymous Coward]

I believe the people claiming he faked his own death are tinfoil hat wearing nutters

Purely Devil's Advocate here, because I have no skin in the game.

The death certificate is from India. Say you're a shady guy in control of millions in cryptocurrency and you want to abscond with it ... how much will it cost you to buy that death certificate in India?

Is there a DNA tested body to prove this?

Lots about this sounds utterly sketchy to me, not the least of which is why this company was deemed to be trustworthy enough to hold onto that much of other people's money.

I don't think you have to be a tinfoil hat wearing nutter to understand that even the stuff the mainstream press is reporting sounds like they're not taking this at face value in terms of if it adds up.

This has literally gone from "trust us, the money is secure", and become "trust us, the money is all gone".

Re: Sterotype much?

[mattyj]

De-regulated? Try never regulated. People invest in imaginary money at their own peril.

Re:but don't worry

[mattyj]

Just like stock exchanges, except that your life's savings are on a thumb drive buried with some rando tech-bro.

Re:Sterotype much?

[hey!]

Well, I do think there's a huge problem with widespread acceptance of stereotypes of male behavior. However that doesn't mean that examples of that behavior don't exist,or that they aren't more likely to be men than women. This just doesn't say anything about being a man per se. P(A|B) P(B|A).

Marketing studies of cryptocurrency show that speculation is dominated by men; some figures show men making up 97% of Bitcoin speculators. However that doesn't mean that all men who use Bitcoin are speculators, nor that even using Bitcoin is common among men as a whole.

Examples of the "crypto-bro" stereotype no doubt exist. This is tied to the greater emphasis for men in the gene-swapping market on social fitness, as opposed to the greater emphasis on physical fertility cues for women. Such men are no more typical of ordinary men than Instagram models are of ordinary women.

Re:Sterotype much?

[HarrySquatter]

How is the word "bro" sexist and how is it even remotely the same as calling anyone a slut? I'm pretty sure lots of men would be surprised that they were being sexist when they call their friends "bros."

You snowflakes are so adorable.

How naive are you people?

[Anonymous Coward]

It seems all(?) commenters here think, the owner is really died!

Look at how public interest in cryptocurrencies died (for a while now)!
Is it really hard to guess that the business was going bad for a while & the owner decided to runaway w/ all customer money, instead of declaring bankruptcy?

Why the owner decided to go to India?
Supposedly, "to build an orphanage"! :-)

Is it hard to guess he went there because it was cheap/easy to buy a fake dead certificate?

If he is really dead then where is the body?
Is anybody saw/verified the body?

Re:lol

[supremebob]

"Deposited his life savings into Quadriga CX's digital exchange" were the stupidity keywords that convinced me not to feel sorry for him.

After all of the Bitcoin exchanges that have failed over the past few years, why do people still DO this?

Re:lol

[fahrbot-bot]

"Deposited his life savings into Quadriga CX's digital exchange" were the stupidity keywords that convinced me not to feel sorry for him.

After all of the Bitcoin exchanges that have failed over the past few years, why do people still DO this?

TFS says he, "just wanted to save a few bucks on transfer fees" moving from CA to Vancouver, so he probably just intended to park the money for a very short time while he moved and found a new bank. Seems dumb in any case. Nerdwallet lists the average international bank wire fees at $45 outgoing and $13 incoming, so he risked $422K US to save $58. Cheaper still would have been to bring some cash, deposit a check to open a new account and use a CC for a bit. Some life lessons are hard, but "penny wise and pound foolish" doesn't have to be one of them.

Re:lol

[jythie]

Yeah, that is why I am really skeptical of they guy's story. If all he was really trying to do was save money on transfering between banks, transfering all his money into an exchange (which has a a fee), then finding enough sellers to convert nearly half a million dollars into crypto (which also has fees), then later find enough buyers to convert it back (more fees) and finally transfer it back to a bank? That makes zero sense unless he also believed it would be making money in the process.

Yes that risk is crazy

[SuperKendall]

plus that third currency is extremely volatile

I had many of the same thoughts you did, but especially this one I don't see questioned my many other people - moving 500k into BTC or the like, even if only for a day is a huge risk in terms of volatility. What if that is the day BTC decided to take a 20% drop just for fun? In fact you can almost be sure that speculators noting such a large volume of purchase would figure out some way to screw the guy short term to make him panic and sell...

I still see BTC as a viable investment, but as short term storage it is nuts and then there are the other factors you mentioned. He was absolutely trying to do something.

Re: Sterotype much?

[taustin]

Slashdot: News for nerds, stuff that matters. And 'tard fights. Lots and lots of 'tard fights.

Re:lol

[HarrySquatter]

Dunning-Kruger effect. They think they are smarter than all the other idiots who were scammed.

Re:Key is diversity everywhere, always

[lgw]

The FDIC has your back up to a point. If there are mass bank failures and the FDIC fails, having two bank accounts is useless. All that works then is a gun and a neighbor who has lots of food and gold and hates guns.

Re:Seems like a lot

[Guspaz]

He'd have to convert it back to real money at some point, so he's not avoiding any costs involved in that. There'd always be a certain small loss going from USD -> Crypto -> CAD. What he was trying to do was save the $58 in wire transfer fees. For the sake of that, he risked $560,000 by giving it to a shady startup company.

Re:lol

[Ol Olsoc]

How am I the snowflake, Sinji? I'm not the incel being triggered by someone being called a "bro."

Incels, snowflakes? Have I stumbled upon the comments section of Youtube?

Re:Sterotype much?

[Ol Olsoc]

Yeah, the linked article can't even manage to be factually accurate at the most basic level. For example, Men are a majority now? Nope.

There is no institutional bias against men? The author of the article has apparently never heard of schools, or universities, who literally advertise that they don't accept men for everything from scholarships to groups and centers paid for by male student fees.

Oh man, and is this ever causing a problem. Males are a marked minority among college students https://www.theatlantic.com/ed... and getting worse.

Very little attention ois being paid to this at the college level, I suspect that it is considered a little less of a problem for the victims - but it is the beginnings of a real problem. The path chosen for modern women is to get a degree, then work until your mid 30's early 40's, then find a husband and immediately start fertility treatments in order to have a child.

But these ladies are having a problem finding a male that meets their expectation. To Google "where have all the good men gone brings up a plethora of results. Most often posed by women, discussed by women, and solutions proposed by women. And usually with a fine smattering of misandry.

When in fact, the qualifications for a "good man" means a college education, having their own place, making more than her, and then there are the physical qualifications. Tall, handsome, ripped. Then there are the life choice demands, which are to be ready to immediately start fertility treatments in a race against the clock.

Oh-ohhh, that college education demand. As we are nearing a 75 to 25 Percent female versus male degree status, right away we have a severe problem.

Coupled with the other demands, these women are going to have a real problem finding mates. A male that fits their demands is probably not looking for a woman of that age and is not looking to become a father at such a late age.

Probably the best article about the problem is https://www.dailymail.co.uk/fe...

Even then, the article starts out: "Where have all the good men gone? These sassy, sophisticated, solvent women say they are struggling to find other halves that can measure up.

No shit.