QuadrigaCX's late founder and CEO used customers' funds to trade for his own account on other cryptocurrency exchanges, the Canadian firm's bankruptcy trustee said.

In a bombshell 70-page report released Wednesday, Ernst & Young claimed that Gerald Cotten, who apparently died last December, transferred millions of dollars in crypto out of customer accounts and into other exchanges, with the funds being used to furnish Cotten's personal lifestyle and trading habits. Overall, it appears that Cotten effectively stole more than $200 million USD from his customers.

"Significant volumes of Cryptocurrency were transferred off Platform outside Quadriga to competitor exchanges into personal accounts controlled by Mr. Cotten," the report said. "It appears that User Cryptocurrency was traded on these exchanges and in some circumstances used as security for a margin trading account established by Mr. Cotten."

Fees and trading losses "appear to have adversely affected Quadriga's cryptocurrency reserves," while other sums were sent to wallets whose owners EY could not confirm.

Between 2016 and the end of 2018, Cotten transferred 9,450 bitcoin, 387,738 ethereum and 239,020 litecoin out of his exchange's accounts (respectively, $88 million, $105 million and $33 million USD at present market prices, though their values have fluctuated – and increased dramatically – over that time).

Cotten also appears to have created fake accounts on Quadriga, credited them with fiat amounts that did not actually exist, and use this fake fiat to purchase actual crypto from customers, with the largest account using the name Chris Markay.

Later, the report says that Cotten margin traded zcash, dash, dogecoin and omisego, where he "generated substantial losses."

An unidentified third exchange received 21,501 bitcoin ($201 million in today's prices) into an account under Cotten's name. All but 8 bitcoin were liquidated, netting some $80 million CAD ($60.4 million USD).

While this exchange is not cooperating with EY, it is cooperating with local authorities in its jurisdiction. EY is now looking to open "formal channels" with these authorities.

Evan Thomas, a litigator with Osler Hoskin & Harcourt in Canada, told CoinDesk that "based on the report, what [Cotten] did was clearly fraudulent and betrayed the trust of Quadriga users."

Cotten's actions could not have been an accident, Thomas indicated, saying:

QuadrigaCX filed for protection from creditors in January, owing customers $190 million worth of crypto and fiat, most of which it could not access because only its late CEO Gerald Cotten knew where the private keys were.

EY's hunt for the missing funds, first as court-appointed monitor and then as trustee when QuadrigaCX formally entered bankruptcy in April, has largely been fruitless.

As of May, the estate had just $21 million of assets to cover $160 million in remaining liabilities, though the most recent report brings the sum closer to $24.5 million.

The U.S. FBI is looking into the losses, as are Canadian authorities.

EY's report also detailed rampant mismanagement and poor practices, noting that Quadriga did not keep administrative logs and had no contingency plan for the loss of funds or its leader.

What's more, the exchange seemingly engaged in poor accounting practices.

For example, the exchange paid two of its nine payment processors $11.8 million CAD (roughly $9 million USD) in fees alone.

Quadriga did not maintain any documentation, however.

"The Monitor has been unable to locate any accounting with respect to the pooled Quadriga Funds," the report said. "The Monitor notes the TPP accounts were used to process User Fiat transactions, fund general Quadriga operating costs and on multiple occasions funds were directed to Mr. Cotten, parties related to Mr. Cotten or counsel/parties acting on his behalf."

It went on to add:

EY also believes that properties in Nova Scotia, properties in British Columbia, investment securities, cash holdings, a boat, an aircraft, luxury vehicles and gold and silver coins that purportedly belonged to Cotten, and now belong to his widow Jennifer Robertson were paid for using Quadriga's customers' funds, and therefore should be liquidated.

"As Mr. Cotten’s and Ms. Robertson’s personal expenditures and the accumulation of their personal assets since 2015 was sourced from Quadriga funds, the Trustee intends to seek the recovery of the Preserved Assets subject to the Asset Preservation Order back to the Estate for immediate liquidation on the basis that the funds which Mr. Cotten directed be paid to them constitute preferences or transactions at under value under the BIA and may be subject to other causes of action asserted by the Trustee," EY wrote.

The proceeds from these sales, if successful, will go to the creditors' estate, and could total as much as $12 million CAD ($9 million USD).

In a separate filing

, EY outlined the process that former QuadrigaCX users who lost money when the exchange went belly-up should follow to file claims.

"Users will be requested to complete and deliver their Proofs of Claim to the Trustee prior to 5:00 p.m. (Halifax time) on August 31, 2019 (the 'Claims Submission Date')," EY said.

EY acknowledged in the filing that creditors have encountered difficulty finding the information they need to prepare claims because Quadriga's website has been down since January.

A committee and lawyers representing users "have expressed concern with the platform site being offline as Users cannot access statement details or information necessary to complete their claims," EY said.

In response, EY says it worked with the creditors' lawyer to help users find ways to retrieve account balance information.

That process involves an online portal where users are asked to type in their QuadrigaCX account number and first name.

"If a match is found, your balances will be displayed," the EY-built web page says, warning: "Be sure to print or screen capture the results."

The auditing firm has also modified the standard form for bankruptcy claims "in order to fit Quadriga’s unique circumstances of having claims against it denominated in Cryptocurrency and Fiat," EY said.

The form, which misspells the word "ethereum" and is interrupted by a page break in the filing, looks like this:

Thomas told CoinDesk that based on the new reports, there may not be much for customers to recover.

"Right now, it looks like the primary source of recovery for creditors will be the fiat and the frozen assets," he said, concluding:

Nova Scotia Supreme Court image via Nikhilesh De for CoinDesk