An anticipated catastrophic end has been put to the story of Canada’s major QuadrigaCX Exchange, as the firm has been declared ‘bankrupt’ by the Apex Canadian Court, Nova Scotia Supreme.
Gerald Cotten, the CEO of QuadrigaCX met with an unexpected death in India earlier this year and with that came the loss of the cryptocurrencies of the 115,000 users stored in Cotten’s cold wallet. As per the statements of Cotten’s wife and the Exchange, the cold wallets which held the user and company assets were owned and managed solely by the deceased Exchange CEO.
On February 5, creditor protection was granted by the Supreme Court with Ernst and Young being appointed as an independent Monitor to look into the assets and funds of the non-operational Exchange. On January 28, all operations were suspended by the Exchange after which creditor protection was filed on the 30th of January.
Apparently, the bankruptcy was approved by Nova Scotia Supreme Court Justice Michael Wood, following Ernst & Young’s recommendation for it to be declared bankrupt earlier this month.
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It appears that Cotten’s personal assets have been mixed with the assets of the Exchange in his wallets. Reportedly, use of QuadrigaCX Exchange funds might have been made to purchase assets which are ‘not a part of the corporate entity’.
The Apex Canadian court has been appealed to, by Ernst and Young for the preservation of Cotten’s personal assets for protection of the investors while the Exchange has been shut down. Jennifer Robertson, the widow of Cotten is also under the effect of the Court’s order and will be unable to transfer, remove or sell any asset that she is currently holding. Although, leverage has been provided to her by the court for covering legal expenses from two bank accounts which are being monitored.
Ernst and Young Co. will be bestowed with better powers as a trustee and a monitor of the funds of the Exchange, Post-bankruptcy, under Federal Bankruptcy and Insolvency Act.
Ernst and Young have produced reports which state that in user withdrawals, an amount over $70 million has been pending with payment processors including gateways like banks and third-party units. For the pending withdrawals, the payment processors and the Monitor- Ernst and Young have purportedly reached an impasse.
A joint decision will be required from the two parties before April 18 as per the Court orders. The estimated amount of loss is near to $150 million, and the recovery of this amount will be made from the assets of the deceased owner and reserved assets of the Exchange.
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Law firms Cox & Palmer and Miller Thomson who represented Quadriga legally have formed an Official Committee for the Affected Users of the exchange in late March. All the affected users will be helped with their representation against QuadrigaCX in the court proceedings.
