The recent death of the CEO of a multi-million dollar cryptocurrency exchange start-up, who held the passwords to $275 million worth of coins and cash, has again highlighted the importance of succession planning for your digital assets and the difficulties that can arise when this is not properly addressed.
Mr Cotton, who started his company five years ago, was always very conscious of security. His laptop, emails and messaging were all heavily protected with encrypted passwords. He took sole responsibility for running the company, and, unfortunately, all attempts by his widow to find any passwords or business records for the company’s digital assets have failed to date. This has left the company unable to retrieve over $200 million worth of Bitcoin, Litecoin and other digital assets held for its customers.
This series of unfortunate events highlights the need for up-to-date succession planning, which includes provisions for your digital assets and who can access them in your absence. Digital asset provisions allow for named attorneys or executors to access online accounts and passwords for accounts ranging from financial institutions to social media. However, this needs to be coupled with consideration of where your account details and passwords are stored.
While a relatively new and developing area in succession planning, the ’disappearance’ of Mr Cotton’s $275 million highlights the importance of succession planning for your digital wealth and what can happen when it is not considered.
See our client update from last year for more information on what happens to your digital wealth on death and incapacity.