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QuadrigaCX, once Canada’s largest cryptocurrency exchange, has now been declared officially bankrupt after months of financial and legal controversies, reported the Canadian new daily CBC on 8 April.
Following last week’s report by the court-appointed independent monitor, Ernst & Young, and their recommendation of bankruptcy for the exchange, the Nova Scotia Superior Court of Justice approved the motion. Justice Michael Wood, who penned the bankruptcy, also granted an asset preservation order owing to the monitor’s report.
QuadrigaCX had been granted creditor protection under the Companies’ Creditors Arrangement Act (CCAA) in February. However, following E&Y’s assessments, the monitor recommended a shift in the process under the Bankruptcy and Insolvency Act (BIA), as the exchange had no real assets under its belt.
Since the investigation is under the BIA, the monitor will have considerable assessing powers as a trustee. E&Y will also be allowed to compel documentation and testimony from witnesses.
The Asset Preservation order will extend to all assets held by late CEO Gerald Cotten’s wife, Jennifer Robertson. As per the monitor’s recommendation, the order prohibits the sale, removal, and transfer of any asset. However, Robertson will be granted access to two bank accounts overseen by E&Y.
Further, a stay on proceedings will be extended according to the bankruptcy process, the court stated.
The operations of the Canadian exchange have been in limbo since CEO Gerald Cotten succumbed to Crohn’s disease in India last year. QuadrigaCX suspended operations on 28 January, with court documents revealing that Cotten was the only person with knowledge of the private keys to the exchange’s cold wallets that held nearly $190 million in virtual currencies.
E&Y’s penultimate report suggested that Cotten did not draw the line between personal and corporate finances hence, the asset preservation order was drawn up. The report added that the exchange may have purchased assets “held outside the corporate entity.”
The documents further suggested that over $70 million in cash, held in drafts and bank accounts of third-party payment processors like VoPay, Alto Bureau de Change, and WB21 is owed to the users.
Lawyers of the aforementioned processors stated that the monitor had given their parties short notice to retrieve the funds, with some even suggesting that E&Y was overreaching in the matter. As per the court’s orders, the monitor and the payment processors have to settle this dispute prior to the 18 April court hearing.