Mike Novogratz-Backed BitGo Offers $100 Million in Crypto Insurance
Originally published on: CCN
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February 20, 2019
BitGo, a crypto custodian backed by Goldman Sachs, is offering up to $100 million in insurance coverage for cold-wallet assets through Lloyd’s. There is no additional cost to BitGo clients.
In a press release, the company said the $100 million of insurance coverage protects custodial assets held by BitGo against:
- Third-party hacks.
- Insider theft by employees of private keys.
- Physical loss or damage of private keys.
Mike Belshe, the CEO of BitGo, touted the new service:
“This is the most complete insurance offering in the industry. It is not always easy for some clients to understand under what circumstances their investments are insured and to what extent their loss would be covered.
We are changing that by being more transparent than any other company about the terms of our coverage. Transparency and accuracy is essential for building trust in the market.”
Goldman, Novogratz Invested $15 Million in BitGo
BitGo, which is based in Palo Alto, California, is financially backed by Goldman Sachs and Galaxy Digital, a crypto merchant bank founded by former Goldman partner Mike Novogratz.
In September 2018, BitGo received regulatory approval from the South Dakota Division of Banking to offer custody services, making it the only regulated custodian developed exclusively for cryptocurrency assets.
BitGo joins a growing number of companies that offer crypto custodian services, including Citigroup, Coinbase and Gemini, all of which are targeting institutional investors.
Quadriga Disaster Spotlights Need for Insurance
One company that could benefit from cold-wallet insurance is Quadriga CX, Canada’s largest cryptocurrency exchange.
As CCN reported, Quadriga lost access to more than $190 million in funds stored in both crypto and fiat after its founder Gerald Cotten unexpectedly died in December 2018. The 30-year-old died in India after suffering from Crohn’s disease.
Cotten had sole control over the funds stored in Quadriga’s cold-storage wallets. These are wallets that are stored offline and are not connected to the Internet.
Top crypto exchanges typically keep a large portion of their funds in cold storage to protect against hacks and other security breaches. Many have a multi-signature system in place so investors can withdraw funds in the event of freak occurrences, like the sole custodian’s untimely demise.
However, Quadriga did not have a system for continuity in place. And now, no one can access the funds since its founder’s death.
Quadriga: We Can’t Find Our Wallets
In early-February, Quadriga admitted that it has been unable to recover the cash and cryptocurrency assets it stored, as CCN reported.
“We have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us.
Unfortunately, these efforts have not been successful. We filed for creditor protection to help resolve these matters and preserve the interests of our customers.”
Two weeks ago, a judge gave Quadriga a 30-day stay on claims from creditors and potential lawsuits while the beleaguered exchange tries to access Gerald Cotten’s laptop and the $190 million in lost crypto.