Blockchain Sleuths Expose One of Crypto's Most Notorious Scammers

Over the past week, one of the most hyped-up decentralized finance ecosystems has fallen apart, with one of the main developers being unmasked as one of the most notorious scammers in crypto history.

The best place to start this story is with QuadrigaCX, one of the earliest cryptocurrency exchanges in Canada. The exchange made international headlines in 2019 after the founder Gerald Cotten died under mysterious circumstances, leaving customers unable to access their funds on the exchange.

It was later discovered that the exchange was essentially bankrupt at the time of Cotten’s disappearance, and many believe that he faked his own death and made off with the money.

There were other shady individuals involved with the project, including the co-founder Michael Patryn, who has gone by numerous different names during his time in crypto. Prior to co-founding Quadriga with Cotten, Patryn was convicted of being involved with an identity theft ring, and is known as a career scammer. After the downfall of Quadriga, Patryn went off the grid amid allegations that he helped Cotten fake his death and defraud the users of the exchange.

Years later, there are hundreds of anonymous developers in the realm of decentralized finance, and this is one of the things that makes the industry great. Privacy and anonymity for users and developers is essential, but at the same time, anonymous founders are not bound by their reputation, unless they are able to build trust through a pseudonymous persona.

This also makes it easy for scammers like Patryn to move from project to project without anyone noticing. Luckily, with the blockchain, it is very hard for these scammers to remain hidden, and that is exactly what happened with Patryn this week.

After the fall of Quadriga, Patryn began working for different DeFi projects as an anon, using the name 0xSifu. Over the past year, he managed to manipulate his way into key positions with billion dollar protocols, where he was in control of the multisig keys that gave access to the treasury. The biggest of these projects was called Wonderland (TIME).

Sifu raised suspicions among investors earlier this month during the massive market crash, after he took money from the Wonderland treasury to cover his own leveraged positions on other platforms, to protect his personal positions from getting liquidated. After further investigation, blockchain sleuths discovered that Sifu’s wallet was connected to wallets used by Patryn during the Quadriga days.

When investigators confronted Wonderland founder Daniele Sestagalli about Sifu’s history, he admitted to knowing about the connection for at least a month, but said that he did not want to judge a person because of their past. The controversy eventually forced the founders to shut down the protocol and disperse the remaining funds in the treasury to token holders, but this was very controversial among investors, because this will force them to lock in losses after a brutal crash.

Regulators will use this as an excuse to crack down on DeFi, but this just shows the power that the industry has to regulate themselves.

-QuadrigaCX was one of the most notorious exist scams in crypto history, which involved the founder disappearing with millions.

-Michael Patryn, the co-founder of the exchange was recently identified as an anonymous DeFi developer involved with Wonderland (TIME).

-Patryn's blockchain transactions were tracked all the way back to 2019 to prove his identity. Wonderland will now be shutting down and returning funds to investors, at a far lower price than most of them bought in at.