QuadrigaCX, The Troubled Cryptocurrency Exchange Files for Creditor Protection
QuadrigaCX is a major Canadian cryptocurrency exchange that has been under massive financial and legal trouble for months now. In a move that was somewhat expected, the exchange has filed for creditor protection.
According to an official announcement on Jan. 31, QuadrigaCX has filed an application for creditor protection in the Nova Scotia Supreme Court today in compliance with the Companies’ Creditors Arrangement Act (CCAA). According to PwC Canada:
“The CCAA presents an opportunity for the company to avoid bankruptcy and allows the creditors to receive some form of payment for amounts owing to them by the company.”
As per the announcement, the court will be asked to appoint Ernst & Young, the ‘Big Four’ auditing firm, as an independent third party to monitor the proceedings on February 5.
According to QuadirgaCX, the filling will give it “the opportunity to address the significant financial issues that have affected our ability to serve our customers.” The firm adds that all their attempts “to locate and secure our very significant cryptocurrency reserves held in cold wallets” have been unsuccessful.
In short, they have been to square off customer balances or to secure services from a financial institution to accept bank drafts.
In October 2018, the exchange disputed a $19.6 million sum with the Canadian Imperial Bank of Commerce (CIBC). At the time it was reported that QuadrigaCX had been experiencing difficulties accessing $16.3 million of its funds since January, the time when the CIBC froze five accounts belonging to Jose Reyes, the exchange’s owner, and its payment processor, Costodian Inc
Subsequently, the CIBC has requested the Ontario Superior Court to withhold the funds and determine whom they belong to, the exchange, the Costodian, or the users who deposited the funds. The court ruled in favor of the bank citing that the owner of the funds was not clearly established. CIBC was then obliged to pass the funds over to the Accountant of the Superior Court in order to identify the owner.
The apparent death of its founder, Gerry Cotten has since then further complicating the exchange’s situation. After the announcement of Cotten’s passing, some users started asking for proof of death. One user even posited a theory that since the keys to the cold storage were only known to Cotten and thus the exchange could not access the assets.
For months now, the user hasn’t been able to access or withdraw their funds. On top of it, a recent maintenance shutdown started the rumor that the had gone insolvent. A Reddit user posted, “They will declare insolvency due to an inability to find a suitable bank to host an account and facilitate transfers.”
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