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".

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

[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...

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"

[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: Sterotype much?

[mattyj]

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

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.

Re: Sterotype much?

[taustin]

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