Quadriga's co-founder has served time in the US for identity theft, documents reveal


This combined photo shows Omar Dhanani on the left in a photo taken on April 27, 2005 and a screengrab of Michael Patryn from a YouTube interview that was broadcast on March 12, 2015.

Passaic County Sheriff's Office and YouTube

The co-founder of the troubled QuadrigaCX crypto-currency exchange is a convicted felon who has served time in the United States for his role in an online identity theft service.

Michael Patryn helped launch the Quadriga trading platform in 2013 alongside Gerald Cotten. The company has been heavily scrutinized since Cotten, its chief executive officer, died at age 30 due to complications of Crohn's disease on its honeymoon in India last December, leaving purse holders unable to access $ 250 million in money and cryptomoeda. .

Patryn denied that he had lived in the United States for more than a decade under the name of Omar Dhanani, a California resident who pleaded guilty in 2005 on charges of conspiracy to transfer identification documents. At the time, Dhanani was a member of an online marketplace called Shadowcrew.com that trafficked numbers and identities of stolen credit cards.

The story continues below the ad

However, The Globe and Mail uncovered several documents – including two Mr. Dhanani reservation photos obtained through a request for public records from the Sheriff's Department of Passaic County, New Jersey – linking the two names.

In a February 8 correspondence with The Globe, Patryn denied that he and Dhanani are the same person. When The Globe introduced some of his findings, he said he would need to conduct more research. "A lot of this is new to me and out of the usual social media chat," he wrote.

This week, when The Globe informed him that he had obtained the photos from the reservation, Mr. Patryn replied: "Although I obviously disagree with your conclusions, I have to wait for a lawyer before answering more deeply, which is unlikely to happen before the deadline ". .

Quadriga Fintech Solutions Corp. was granted creditor protection in Nova Scotia in February after telling the court that about $ 180 million of its cryptocurrency holdings are missing. Cotten, who was the sole director of the company at the time of his death, was the only one with access to funds, according to a testimony presented by his widow, Jennifer Robertson.

Patryn and his partner, Lovie Horner, remain Quadriga's two largest shareholders, although he has had no involvement in the company since 2016, he previously told The Globe. His LinkedIn profile provides few details about his career prior to Quadriga, only saying that he worked as a consultant for numerous digital currency providers between 1999 and 2013.

However, court documents show that as early as 2002, Dhanani was an active member of Shadowcrew.com, a site described by US prosecutors as an "online identity theft activity center". The site has trafficked more than 1.5 million stolen credits. card and bank card numbers, according to court records.

In the fall of 2004, following a one-year investigation dubbed "Operation Firewall," the US Secret Service – which also investigates financial crimes – arrested more than 20 people involved in the online marketplace. Dhanani, then 20 years old and living in California, was among them.

The story continues below the ad

Operating under the pseudonyms "Jaeden" and "Voleur," Dhanani provided Shadowcrew members with an anonymous electronic money laundering service in exchange for a 10% cut, according to court documents filed by the US District Attorney's Office. of New Jersey. In addition to his online pseudonyms, Dhanani had a pseudonym in the real world: US court records say he was known by the name of Omar Patryn.

Mr. Dhanani was detained in October 2004. He was released on bail in May of the following year after two members of his family, Nazmin and Nabatbibi Dhanani, used $ 250,000 in their property in Orange County, California. bail. Neither responded to a request for comment.

Dhanani was confined to a 24-hour house arrest without access to a computer while on bail. Officials had already seized his Mercedes-Benz 2000 and nearly $ 5,000 in cash and about $ 2,000 in Western Union money orders in connection with the charges. He contested the seizures by saying in a letter to the court that the items were removed from his home and that most of the money was seized in a closet in his father's room.

He was later sentenced to 18 months in federal prison and released in May 2007.

He also pleaded guilty to several counts, including robbery and high school robbery, the following month in Orange County, according to court documents. Records list his nickname as Omar Patryn.

In 2009, according to court documents, he had been deported to Canada.

The story continues below the ad

That year, a Vancouver-based company called MPD Advertising Inc. was incorporated, listing two directors: Michael Patryn and Nazmin Dhanani.

Someone with the username "Patryn" returned to TalkGold.com, a forum to discuss digital currencies, investment opportunities and day trades a few months after Dhanani's release from prison. "Mine, you stayed away for a long time," one user wrote. A month later, "Patryn" tried to shake up the business. "You know what my services entail," says an October 2007 post. "They're still available."

Six months later, in April 2008, a company called Midas Gold Exchange Inc. was registered, listing Omar Patryn as its sole director. The business address points to a Calgary mailbox. That same year, a website called Midas Gold Exchange, launched at M-Gold.com, offers digital exchange services.

One of the major currencies that M-Gold.com managed was known as LR, created by a Costa Rican company called Liberty Reserve. Incorporated in 2006, Liberty Reserve was one of the first significant players in the digital currency space, promising to allow anyone to send and receive money around the world. Users did not have to validate their identities.

The bland Liberty Reserve website has long featured a photo of a woman working on a laptop. But beneath the surface was "a criminal enterprise, designed to help criminals carry out illegal transactions and to launder the proceeds of their crimes," according to US prosecutors. Federal authorities closed it in May 2013, and its founder was indicted by the US Attorney's Office for the Southern District of New York. The scope of the illegal activity was "disconcerting," according to the indictment. Liberty Reserve facilitated more than $ 8 billion in transactions, including payments related to credit card fraud, identity theft, investment fraud, hacking, child pornography, and drug trafficking.

The company's lack of anti-money laundering controls was so blatant that a US secret agent created an account with the name "Joe Bogus" from "Completely Made Up City" and sent funds to another agent disguised as a "cocaine" ".

The story continues below the ad

The Liberty Reserve founder pleaded guilty in 2016 to a conspiracy to commit money laundering and was sentenced to 20 years in prison.

Anonymity was incorporated into the business model. Users have never sent funds directly to the company; Instead, they transferred money to a third party, who would credit the user's Liberty Reserve account with digital currency. (The process was reversed when users wanted to remove it). Exchangers usually charge a processing fee of 5% or more. Liberty Reserve maintained a list of "pre-approved" changers on its site – including M-Gold.com, which claimed to be a legally incorporated company in Canada. M-Gold.com boasted of their connections on their site. "We met with the administration of the Reserve of Freedom in Costa Rica," says an update of an archived version of the December 2008 website.

In addition to closing Liberty Reserve, US authorities have seized more than 30 registered domain names for the exchangers in a civil forfeiture case, including M-Gold.com. Exchangers "were directly involved in the Liberty Reserve money laundering operation," Southern District Attorneys in New York said in court documents. "Without them, there would be no money for Liberty Reserve to wash." The exchangers also provided an additional layer of anonymity.

The contact name of M-Gold.com, according to court documents, was Omar Patryn, and one of the email addresses listed for him was [email protected]. The Globe corresponded with Michael Patryn through this email address. Michael Patryn also used this address in 2018 when he hired a company to record his image online, according to court records.

The names Omar Patryn and Michael Patryn are linked in two other ways. When Michael Patryn was fined in 2011 in British Columbia for not wearing a seat belt, court records listed his pseudonym Omar Patryn. In a B.C. civil suit filed against Mr. Patryn in 2013 related to a traffic accident, the author listed Mr. Patryn's address as the same Calgary post box used by Midas Gold Exchange Inc.

Just six months after the Liberty Reserve closed, Michael Patryn and Cotten launched the Quadriga.

The story continues below the ad

There were a number of similarities between Liberty Reserve and the Quadriga platform. Users who wish to purchase crypto-coins through Quadriga first send money to a third-party payment processor. Your account would then be credited with the QuadrigaCX Bucks, which could be used to buy virtual coins as bitcoin on the platform. When users left, the money would be deposited by the payment processors.

There were important differences as well. Quadriga required users to submit documents verifying their identities, and in 2013 the company was registered as a financial services company with the federal anti-money laundering agency. (The registration expired in 2016 when Quadriga failed to renew it.)

Quadriga has never "had any association with Liberty Reserve as far as directors know," said Richard Niedermayer, a lawyer for Stewart McKelvey of Halifax, on behalf of the company.

With the stock market growing, Patryn, who had a consulting contract with Quadriga, led an effort to publish it on the Canadian Securities Exchange. In a video interview posted on YouTube, he unveiled Quadriga's imminent status as the world's first crypto-currency exchange.

But by 2016, the listing effort failed, creating a split between the two co-founders of the company, Patryn told The Globe. "I left the company for more than three years amid a fundamental disagreement with Gerry over his decision to discontinue the listing process," he said in an e-mail in early February. "We remained friends, but our relationship was tense."

He also told The Globe that he was never the director of Quadriga, a fact confirmed by Niedermayer.

The story continues below the ad

Online rumors about Mr. Patryn's past in the United States haunted him for years, and there were frequent whispers in the Canadian crypto-coins community about his history. As The Globe recently reported, Patryn tried to suppress these rumors last year by hiring Reputation.ca, a Toronto-based company that offers services to bury negative research results and promote positive content. He was more concerned about a post on the Complaint Forum related to Omar Patryn and Midas Gold. Reputation.ca also alerted you to Reddit posts by linking you to Omar Dhanani.

Reputation.ca has created 10 different websites, articles and profiles about Mr. Patryn, publicizing it as a "fintech spokesperson" and a "popular speaker at industry conferences". An article on the Young Upstarts website said he made a season as an MMA fighter "with an impressive record of 7-1" and that he was an experienced poker player, having won $ 2 million in several tournaments.

Mr. Patryn eventually sued Reputation.ca at the Toronto Small Claims Court in November 2018, claiming that the company was unable to remove the Complaints Board position within an agreed time limit. Reputation.ca denied the allegation and claimed that Mr. Patryn simply stopped paying after about three months. "Our regular customer review process fell short when we agreed to take Mr. Patryn as a customer," said Matt Earle, president of Reputation.ca, when questioned in early February. "We have made changes to our information registration process to ensure that this does not happen again."


Source link