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Quadriga mystery deepens with little evidence of cold wallets containing $250M

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A cryptocurrency analyst says there is little evidence that tens of millions of dollars of assets allegedly trapped on hard drives belonging to the deceased founder of a Canadian cryptocurrency exchange are being stored in so-called cold wallets.

QuadrigaCX’s 30-year-old founder, Gerald Cotten, died unexpectedly in India on Dec. 9. It took more than a month for Cotten’s widow, Jennifer Robertson, to post the news on the exchange’s website on Jan.14. On Jan. 31, Quadriga announced it had filed an application in Nova Scotia Supreme Court for creditor protection.

In a sworn affidavit, Robertson said Cotten held the majority of the $250 million in assets from 115,000 Quadriga users in cold wallets.

A cold wallet is where cryptocurrency is stored when not being actively traded in hot wallets on an exchange.

Analytics firm Elementus and others have been analyzing the blockchain for evidence of these cold wallets and have been unable to find them.

The blockchain is a distributed ledger that records all transactions across many computers where anyone can track the movement of publicly available cryptocurrency transactions.

“So you know when looking on the blockchain to see whether what’s there corroborates the story, you would expect to see funds moving out into a cold wallet,” said Max Galka, CEO of Elementus. 

“The fact that no cold wallets are present means that, yeah, that’s the story that they’re telling, it’s not consistent with what they’re saying.”

Life savings lost

Xitong Zou, who lives in the Greater Toronto Area, said he’s not sure he’ll ever see his life savings again.

Last October, Zou decided to exchange his more than $420,000 US into Canadian currency — a value of about $560,000. Instead of using banks and paying fees associated with such a transaction, he decided to transfer the funds through Quadriga.

QuadrigaCX referred to itself as a leading bitcoin exchange.

Zou said week after week he would contact the exchange, asking when the transaction would be complete and he could retrieve his money.

“They kept telling me it was because of the CIBC lawsuit at the time and every time I emailed them, that’s what they told me. They said just wait another two weeks, just wait another two weeks, you’ll get your money,” he said.

CIBC took legal action and froze almost $26 million of Quadriga’s funds in early 2018. The bank alleged it was unable to determine who the money belonged to and began investigating.

Despite this, Zou said he believed Quadriga to be a trustworthy exchange. But the circumstances around Cotten’s death and how the exchange was run raises many questions, he said.

“It’s all a very crazy story that a lot of us could not believe,” said Zou.

“People really panicked from that time and a week later they shut down the website. We couldn’t withdraw anything anymore. All our money was basically stuck on there and then we heard about the creditor protection they’re filing with the CCAA [Companies’ Creditors Arrangement Act].”

Zou is one of a number of Quadriga users who have hired a law firm to represent him. He’s sworn an affidavit in an effort to get back some of his money.

Little evidence of cold wallets 

Galka said there could be a reasonable explanation as to why he and other analysts can find little evidence of cold wallets that Robertson claims exist, but the lack of evidence on the blockchain is suspicious.

Gerald Cotten helps two preschoolers try out the first bitcoin converting ATM in Vancouver in 2015. (Alex Salkeld)

“There are some tricky pieces about it because when you see money moving out of the Quadriga wallets, it’s not always clear whether it is a customer who is making a withdrawal or whether the transfer is being made on Quadriga’s behalf with their own treasury funds,” he said.

“So that’s kind of the tricky part of what people have keyed in on though is that when you look around at all the places where money is leaving their hot wallets, [there doesn’t] seem to be many possible candidates for a long-term storage cold wallet.”

On Feb. 2, Jesse Powell, CEO of another exchange called KrakenFX, tweeted that Quadriga had “thousands” of wallets on his exchange and tagged RCMP, saying to contact him.

“We have thousands of wallet addresses known to belong to @QuadrigaCoinEx and are investigating the bizarre and, frankly, unbelievable story of the founder’s death and lost keys. I’m not normally calling for subpoenas but if @rcmpgrcpolice are looking in to this, contact @krakenfx,” read the tweet.

Messages to Powell were not returned. Instead, a link on his LinkedIn profile asks those wanting to contact him to pay $100.

Possible good news for Quadriga users

Galka said if Powell’s claims are true, it could be good news for people like Zou hoping to get their money back.

“If that’s the case that instead of being sent to a cold wallet on the blockchain they were sent into the custody of other exchanges, then if they’re still there, then they should be fully accessible and those exchanges should be able to return them to the rightful owners,” he said.

Galka would not speculate on why Quadriga would be holding thousands of wallets on another exchange and said there could be an innocent reason as to why Quadriga would do such a thing.

“What will usually happen to those funds is that they will move into exchanges in very small increments which is not unlike how money laundering happens in the real world; that, you know, if you deposit a million dollars in cash into a bank, that’s likely to raise some suspicion,” he said. 

“But if you’re able to sort of move that money around in very small amounts, it can get on under the radar and they may not be noticed. And that’s true also of cryptocurrency that exchanges are pretty diligent about scrutinizing large deposits.”

Galka said he believes regulation could be the answer to some of the many problems that have plagued the cryptosphere throughout its history. 

“I think this space needs to clean up. I think it’s a real shame that for so long it has been marred by … all of this kind of stuff that scares people away.”  

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How Law Firms Can Become Successful Marketing Stories

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Today, the legal industry has become saturated due to the growing number of law firms springing up on every corner. This has made it a lot more difficult for smaller legal organizations to contend with their bigger counterparts and gain the visibility they need to grow their business.

Subsequently, most law firms are adopting digital marketing strategies to attract customers and position themselves above their competitors. However, building the specific online marketing strategy that would be a perfect fit for your firm takes a lot of effort and experience.

Search engine algorithms are still quite opaque, and the dynamic nature of the internet means that marketing strategies are constantly evolving. How then can a law firm determine the best marketing technique for themselves?

Below are some expert tips on how to build a successful marketing strategy for your law firm and attract more clients:

Increase organic traffic to your website

The advent of the internet makes it very easy for individuals to search online for whatever products or services they require. Therefore, it is important for law firms to employ effective online marketing strategies that can increase the number of visitors to their website.

Matt Bowman, [resident of Thrive Internet Marketing Agency, says videos, content and free ebooks that deliver value to your target audience can increase traffic to your website and make it a one-stop shop for all legal information.

Search engine optimization (SEO) is another great way to increase your firm’s online reputation. Ranking your website on the first page of a search engine for a relevant keyword can increase the visibility of your law firm but can be difficult to achieve due to the ever-changing nature of search engine algorithms. Nonetheless, just like Chicago lawyer Russell Knight learned, writing quality articles and incorporating quality backlinks to your content are some of the ways you can increase your page rankings.

Additionally, improving your social media presence is another way to increase the number of visitors to your website. By regularly posting updates and sharing quality content across different social media channels, it can motivate followers to check out your website. According to David Reischer, Esq., a lawyer at LegalAdvice, posting infographics is a perfect way for law firms to increase traffic to their website.

Build brand credibility

For every prospective client, one of the criteria for selecting a law firm to engage is how trustworthy and reputable they are. To adequately portray your firm as trustworthy, having a modern, optimized website is important.

Your website is typically an online representation of your firm and once it appears outdated and unattractive, it sends a negative message to your prospective clients. Therefore, always ensure that your website is easy to navigate, aesthetically pleasing, mobile-friendly and has quick loading time.

Constantly sharing legal information on niche topics and contributing answers to questions on forums like Quora can position your firm as a subject-matter expert. Senior legal partner at Miracle Mile Law Group Steven Isaac Azizi, Esq., also says including client testimonials on your website is very useful as it not only showcases your quality but improves your firm’s reputation

Increase brand awareness

As a law firm, it is necessary to adopt a dynamic marketing approach and evolve with the times if you intend to remain relevant. As highlighted previously, having a website that’s properly optimized for mobile devices is critical to achieving widespread recognition.

According to Statista, of all website traffic generated globally in 2018, more than 50 percent came from mobile devices; they are now currently accounting for 50 per cent of all web page visits served globally. Therefore, having a mobile-friendly website is imperative when creating online awareness for your law firm.

Giving prospective clients the ability to easily access information about legal issues on their mobile devices will naturally attract visitors to your website. Also, ensure that all content on your website is easy to read on a mobile phone at different resolutions.

This article is provided by dNovo Group.

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Hong Kong protests create potential problems for Ottawa, says academic

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There are four or five flights a day from Vancouver to Hong Kong during the summer season. When they land this weekend, passengers will be met by a sea of protesters staging a three-day occupation of the Hong Kong airport’s arrivals hall.

The protesters are seeking international attention as the city enters its tenth straight weekend of political demonstrations that have, at times, been chaotic and violent.

Airport authorities are taking extra security measures and the Canadian government has raised its travel advisory.

Aside from monitoring local media and avoiding areas where large protests are unfolding, there are several issues for Canadians and Ottawa to consider.

“It’s a perfect storm of domestic tensions playing into international views on Beijing’s intentions and policies,” said Paul Evans, a global affairs professor at the University of B.C. “The dissatisfaction fuelling the protests is, in part, about feelings about freedom, democracy and Hong Kong’s autonomy. But it is also about material concerns related to housing, social services and career prospects.”

The oft-quoted number of Canadian passport holders in Hong Kong is about 300,000. This is an estimate made in 2011 by the Asia Pacific Foundation, which, at the time, said it was based on “conservative assumptions” and that a higher estimate would be over half a million.

There are concerns that, should the situation spiral out of control, there would be protection issues for the federal government to manage. After the Tiananmen Square massacre in Beijing in June 1989, several thousand Canadians were airlifted out of China. But the large number of Canadians in Hong Kong would make evacuation and consular protection much more challenging.

A more immediate issue is Ottawa’s response to the prospect of protesters fleeing arrest by Hong Kong authorities and seeking refuge in Canada.

“Vancouver is already in the global spotlight as a result of the (Huawei executive) Meng Wanzhou arrest and hearings,” said Evans. “Considering the huge number of connections between the two cities, managing requests for political asylum has the potential to put Vancouver in the spotlight in an even bigger way.”

Despite the advisory, many in Hong Kong report a sense of order now that they have adjusted and life is continuing around the protests.

“Local social media is providing good updates regarding the locations and times of the protests,” said Eric Li, a professor of marketing at the University of B.C. Okanagan who is visiting family in Hong Kong and doing some research.

He added that some visitors might be getting limited information if they are only relying on official announcements from government channels.

Li said he feels safe, but “there has been more tension and conflict between the government and police and citizens as well as businesses. The pro-(Beijing) camp and protesters are criticizing each other and there are also (arguments) within families and between friends and colleagues.”

Li has been trying to be “neutral” as a “personal choice. As a person who calls Canada ‘home,’ and Hong Kong ‘my hometown,’ I should say the young protesters are very well-organized and disciplined. The government should actively engage youth in their planning rather than excluding them in the process or putting them in an opposition position.”

“It’s crucial for the Hong Kong government to take a few steps to resolve conflicts through providing open conversation with key stakeholders and young leaders. And protesters should remind themselves the purpose of the (protests) as well as the consequences of their (actions).

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PROREIT buying office, industrial buildings in Ottawa, Halifax

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(PROREIT) will use some of the proceeds from its latest, and largest, share offering to help it purchase two office and industrial properties in Ottawa, and five industrial properties in Halifax for $97.8 million.

(PROREIT) will use some of the proceeds from its latest, and largest, share offering to help it purchase two office and industrial properties in Ottawa, and five industrial properties in Halifax for $97.8 million.

“These acquisitions provide meaningful increases in our industrial sectors and expand our presence in Ontario and the strengthening Halifax market,” president and chief executive officer James Beckerleg told RENX.

PROREIT (PRV-UN-T) is acquiring a fully occupied boutique office building in Ottawa’s central business district. It’s surrounded by tourist sites, multiple restaurants and retail offerings.

PROREIT is also purchasing a class-A mixed-use, multi-tenant flex industrial property in the west-end Ottawa suburb of Kanata. It includes an office and a research and lab facility with what the trust calls exceptional power, air handling and cooling specifications.

The building is fully leased and its tenants are in the material sciences, defence, communications and medical technology fields.

The two Ottawa properties have a combined gross leasable area of 338,000 square feet and a weighted average lease term of 6.6 years. Many of the leases include contracted rent steps.

While the property addresses and additional details are confidential until the deals close, which is expected this quarter, Beckerleg said they’re both institutionally owned and have been maintained to high standards.

The addition of the Ottawa properties will increase PROREIT’s portfolio exposure to the Ontario market to 29.1 per cent by gross leasable area and 29.3 per cent by base rent, making it the REIT’s largest provincial market. It increases the Ottawa portfolio to approximately 620,000 square feet.

“We entered the Ottawa market with our $52-million portfolio acquisition of five office properties last year,” said Beckerleg. “This fits our strategy of investing in strong markets where we can increase our exposure to both of these industry sectors.

“Ottawa is seeing significant growth in office and industrial properties.”


PROREIT’s new Halifax acquisitions

PROREIT has a contract to acquire five light industrial buildings with clear heights of between 18 and 24 feet in Halifax’s Burnside Industrial Park. The portfolio represents 358,000 square feet of gross leasable area.

The buildings are 93 per cent occupied with a weighted average lease term of 4.1 years. Many of the leases include contractual rent steps.

While more details won’t be made available until the deals close, which is expected this quarter, Beckerleg said the condition of the buildings is similar to its Ottawa office purchases. The five buildings have been institutionally owned and maintained at a high level.

“The Halifax industrial market has enjoyed declining vacancies in line with the expanding Halifax economy,” said Beckerleg. “There has been a marked increase in institutional interest in the Halifax industrial sector.

“We like this market. Again, it fits our strategy of focusing on mid-size cities with strong investment metrics.”

PROREIT’s $50-million offering

As part of its funding for the purchases, PROREIT will issue 7.15 million shares on a bought-deal basis at a price of seven dollars per unit, for gross proceeds of approximately $50 million, to a syndicate of underwriters.

PROREIT has also granted the underwriters an over-allotment option to purchase up to an additional 1,072,500 units on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the offering. It’s expected to close on or about Aug. 16.

“This capital raise, our first since graduating to the TSX, is the largest in PROREIT’s six-year history,” said Beckerleg. “We believe listing on the TSX and consolidating our units to trade in the seven-dollar range has substantially broadened our potential investor base. We believe the success of this capital raise confirms that.”

The Ottawa and Halifax acquisitions will be funded with approximately $30.8 million in cash from the offering and approximately $67 million in new mortgage financing at a weighted average interest rate of 3.4 per cent.

PROREIT intends to use $13 million from the offering to repay debt.

Impact of acquisitions on PROREIT’s portfolio

Upon completion of the acquisitions, PROREIT will own 91 income-producing commercial properties representing approximately 4.4 million square feet of gross leasable area and $625 million of gross book value, with a weighted average lease term of 5.7 years.

The acquisitions will also increase PROREIT’s industrial and mixed-use exposure by another 636,726 square feet to more than 2.8 million square feet. That represents 64 per cent of its total gross leasable area and 46 per cent of its total base rent.

While PROREIT has no other immediate acquisition plans, Beckerleg said opportunities are always being reviewed.

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