MONDAY,NOVEMBER25,2019 | THEGLOBEANDMAIL O A 9
wrote to him through AOL In-
stant Messenger in 2004, accord-
ing to a chat transcript provided
to The Globe.
“lol,” sceptre said, “you knew
about that?”
“you make off with a lot of
$$?”
“no...I was caught,” sceptre re-
plied. “I have refunded alot. they
found out my name and stuff.”
He added he had no idea how his
details were discovered. The oth-
er user advised him to use prox-
ies, referring to services that de-
ploy phony IP addresses to hide a
computer’s location.
“I do now,” sceptre said. “even
to talk to you lol.”
In August, 2006, an e-mail ar-
rived in the inbox of an individu-
al who ran a website that promot-
ed HYIPs. (The Globe has granted
anonymity because the source is
concerned about reputational
harm.)
“I am in a horrible position
right now where I need to make
about $5000 within a few weeks,”
the e-mail began. The author ran
a HYIP called United Private In-
vestment Enterprise, or U-Pie for
short, and proposed a business
deal: a 25-per-cent referral com-
mission in return for free adver-
tising.
“You are giving away a bit of
advertising in exchange for thou-
sands and thousands of dollars
down the road,” the e-mail read.
“You get rich. My problems of
needing $5k in a few weeks are
over. Everyone is happy.” The e-
mail was sent from a personal ac-
count belonging to Mr. Cotten,
The Globe has found.
U-Pie, which claimed to em-
ploy three day traders to generate
profit, was launched in the sum-
mer of 2006, when Mr. Cotten
was preparing to attend his first
year in the commerce program at
York University’s Schulich School
of Business in Toronto. On Talk-
Gold, a new account under the
name Voltaire popped up to pro-
mote U-Pie.
The Globe obtained a 2006 e-
mail sent by Voltaire to a U-Pie in-
vestor. The IP address in the
header of the e-mail indicates it
was sent from a computer con-
nected to the internet network at
York, where Mr. Cotten was al-
ready living in residence.
U-Pie’s website had no de-
tailed information about its own-
ers or strategy. But there was a
twist to the standard HYIP play-
book – Voltaire offered to meet
investors in person as part of a
due-diligence process.
In November, 2006, a small
group of U-Pie investors gathered
for dinner at a vegetarian restau-
rant in Toronto. A well-dressed
young man strolled in and intro-
duced himself as Dan Vanaman, a
20-year-old from Florida. He was
Voltaire, he said. According to
one attendee, Mr. Vanaman
claimed he was visiting Toronto
to interview a trader for U-Pie.
When shown photographs of
Mr. Cotten by a Globe reporter 13
years after the dinner, the attend-
ee did not recognize him. The at-
tendee could only recall that Mr.
Vanaman was slim and had
blonde hair, a general description
matching Mr. Cotten.
By January, 2007, U-Pie
claimed to have nearly $62,000 in
working capital. A couple of
months later, the website went
offline. Users on a forum called
GoldenTalk, another site for dis-
cussing HYIPs, complained about
the disappearance. On TalkGold,
Voltaire never logged in again.Running HYIPs wasn’t necessar-
ily easy money. Hundreds of pro-
grams all fought for the same
pool of investors, and there was
always the risk of getting caught.
But there was also money in the
underlying architecture that fa-
cilitated HYIPs: anonymous dig-
ital currencies and payment ser-
vices.
Mr. Cotten turned his sights
here, too, and there are indica-
tions he didn’t work alone. At
some point, he met Michael Pa-
tryn. In the prebitcoin world of
digital currency, Mr. Patryn was a
notorious figure. On various on-
line forums, including TalkGold,
Mr. Patryn was rumoured to be
hiding a criminal past and living
under an assumed name.
The rumours didn’t dissuade
Mr. Cotten from building a
friendship with Mr. Patryn, both
online and off. They got into busi-
ness together, too. Eventually, the
pair would found QuadrigaCX.
Mr. Patryn’s criminal past was
no rumour, The Globe first re-
ported in February. He had previ-
ously lived in California as Omar
Dhanani and offered a money-
laundering service through shad-
owcrew.com, an online market-
place for stolen credit-card and
bank-card numbers. In October,
2004, the then-20-year-old was
one of nearly two dozen people
arrested by the U.S. Secret Ser-
vice.
In 2005, Mr. Patryn pleaded
guilty to one count of conspiracy
to transfer identification docu-
ments and was sentenced to 18
months in a federal prison. After
his release in 2007, he was de-
ported to Canada, where he lived
under the names Omar Patryn
and Michael Patryn. (Bloomberg
has reported Mr. Patryn legally
changed his name twice in Brit-
ish Columbia – in 2003 and 2008.)
By that time, a new digital cur-
rency called Liberty Reserve was
gaining popularity. Operated by a
company of the same name in
Costa Rica, it had no anti-money-
laundering controls and did not
verify client information. Users
couldn’t send money to LibertyReserve directly, either. Instead,
they wired it to third-party ex-
changers, which would then
credit the users’ Liberty Reserve
accounts with digital currency for
a hefty transaction fee.
U.S. authorities were closely
watching Liberty Reserve, and in
2013, the Department of Justice
seized the domain name, shut
down the service and indicted
the founder. Authorities called
the operation a “criminal busi-
ness venture” that catered to us-
ers looking to launder the pro-
ceeds of HYIPs, credit-card fraud
and identity theft, according to
court documents. All told, the
site had processed more than 78
million transactions worth a
combined US$8-billion dollars.The founder was sentenced to 20
years in prison.
The department also seized
more than 30 domain names reg-
istered to exchangers that
worked with Liberty Reserve and
took them offline, including one
called Midas Gold Exchange. The
Globe has previously revealed
the extensive links between Mr.
Patryn and Midas Gold, which
launched in 2008. Investigators
said the exchangers were essen-
tial for laundering money. Midas
Gold had a sizable account on the
Liberty Reserve platform, accord-
ing to an exhibit filed with the
court. More than US$5.2-million
flowed through it.
That same exhibit, buried in
reams of court documents, indi-cates that Mr. Cotten was also in-
volved. While the name attached
to the Midas Gold account on the
platform is Omar Patryn, the e-
mail address is listed as ger-
[email protected], a person-
al account used by Mr. Cotten, the
Globe has confirmed.
Mr. Patryn did not address spe-
cific questions from The Globe,
but instead provided a general
statement. “Gerry always referred
to his prior startups as ‘small in-
ternet casinos,’” he wrote
through Telegram, an encrypted-
messaging app. “It wasn’t of in-
terest to me so I didn’t really look
further. They did not seem to
generate much revenue.” (The
improper acts at Quadriga took
place after he left the company in
2016, he added.)
Mr. Cotten’s ambitions were
bigger than running HYIPs and
intermediaries. He also launched
his own online payment service.
According to a source with direct
knowledge of the matter, Mr. Cot-
ten started an entity called HD-
Money in 2008.
HD-Money styled itself after
Liberty Reserve and was even fea-
tured as a merchant partner on
its website for a while. HD-Money
promised to allow people from
all over the world to transfer
funds instantly for a 1-per-cent
fee, according to archived ver-
sions of its website. Payments
were irreversible, and “securely
located outside of the reach of
many governments,” the site
claimed.
How much traction Mr. Cotten
achieved is hard to tell, although
several HYIP websites accepted
payment with HD-Money. Short-
ly after U.S. authorities shut
down Liberty Reserve, the HD-
Money website was scrubbed
clean, except for a disclaimer say-
ing the service was not available
in the U.S.Over the years, Mr. Cotten built
dozens of websites, sometimes
registered in his own name.
Many, such as selenagomezpho-
to.com or knee-pain-when-bend-
ing.com, were clearly attempts to
generate ad revenue through
Google searches.
There are still more sites, no
longer online, that appear linked
to Mr. Cotten, but where the own-
er was shielded behind anonym-
ity services. The digital trails lead
to many dead ends. Looking up
the IP address of the server where
a couple of the sites linked to Mr.
Cotten were hosted, for example,
reveals a constellation of long-
abandoned HYIP websites.
One of those curious websites
sparked to life in 2012, abouta
year before Mr. Cotten and Mr. Pa-
tryn launched Quadriga. It was
called the Quadriga Fund and
featured all the hallmarks of an
HYIP: a vague investment strate-
gy, deposits through digital cur-
rencies and unnamed operators.
Quadriga Fund claimed it was
managed by four investment pro-
fessionals (the word “quadriga”
refers to a chariot pulled by four
horses), with offices in Toronto,
Montreal and Vancouver. A Face-
book page went up, too, featuring
a video of a supposed long-time
client.
“Over all, I couldn’t be more
satisfied with the Quadriga
Fund,” says the man in the video,
seated in front of a computer
screen.
The man was actually a paid
spokesperson who advertised his
services on a website for freelan-
cers, charging US$5 for a video
testimonial.
Whoever created Quadriga
Fund is still unknown, and it’s
unclear whether the operators
even raised any money for it. The
site wasn’t online for long. By
2014, it was gone, and the
doomed cryptocurrency ex-
change QuadrigaCX was open for
business.NEWS |Mr.CottenisseenatBitcoinHouseinParisin2014.Overthreeyears,Mr.Cottenliquidated$80-millionworth
ofbitcointhroughanoffshoreexchange,someofwhichcamefromQuadriga.FACEBOOK/QUADRIGACXMr.CottenbuiltafriendshipwithMichaelPatryn,picturedabovein2005,
left,andin2015,right,andthetwoofthemfoundedQuadrigaCX.Mr.
PatrynhadpreviouslylivedinCaliforniaasOmarDhanani,andwas
arrestedbytheU.S.SecretServiceforhisinvolvementinamoney-
launderingservicethroughshadowcrew.com.Afterhisreleasefromjailin
2007,hewasdeportedtoCanada,wherehelivedunderthenamesOmar
PatrynandMichaelPatryn.PASSAICCOUNTYSHERIFF'SOFFICE,YOUTUBE