Canadian crypto exchange QuadrigaCX has filed for bankruptcy as the attempt to restructure the company has failed. The move was approved Monday by a Nova Scotia judge, the country's national broadcaster reported.
QuadrigaCX Enters Bankruptcy Proceedings As Bid to Restructure Fails
News that QuadrigaCX’s CEO had died in India of complications from Crohn's Disease was made public on January 14. By the end of the month, the exchange went offline, saying it was seeking protection from creditors through bankruptcy.
The exchange and all related companies were granted protection on Feb 5 pursuant to the Companies' Creditors Arrangement Act (CCAA). Yet no assets were able to be located and with the key to the cold wallets in the possession of the CEO alone, recovering crypto assets the exchange allegedly had proved difficult.
Yesterday marks the end of legal wranglings and provides hope that Ernst and Young, who were court-appointed to manage the affairs of the company, will have more scope to locate whatever funds the group has, given it will have new powers as a trustee under the federal Bankruptcy and Insolvency Act.
$260 Million Still Missing, 115,000 Canadians Still Seething
The exchange went offline with around $260 million worth of cash and cryptocurrency. Among that, there is thought to be $190 million worth of crypto assets, including bitcoin and ether, purportedly stuck inside cold storage wallets to which only the deceased CEO had access.
More than 115,000 users have been affected. The new court order means that Ernst and Young has control over the late Gerald Cotten’s estate and his wife, Jennifer Robertson’s assets. Robertson will be able to service her living and legal costs under the supervision of the auditing firm.
QuadrigaCX Controversy One of Crypto’s More Bizarre
With Ernst and Young granted the authority to demand the production of documents and testimony from witnesses, users may be more likely than before to gain access to some of their lost funds.
Taylor Monahan, founder and CEO of MyCrypto, said in early February that the exchange may not actually have any cold wallets, let alone crypto assets full of crypto assets.
I'm seeing NO indication of Quadriga ever having cold / reserve wallets for ETH. Looking at their 3 main addresses:
0xb6aac3b56ff818496b747ea57fcbe42a9aae6218 (purple - active)
— Taylor Monahan (@tayvano_) February 4, 2019
And for a CEO to die in India from Crohn's Disease complications without having shared keys to millions of dollars worth of assets to anyone is an unforgivable oversight.
Others have pointed a number of other elements in the QuadrigaCX debacle that appear suspicious. Gerald Cotten legally changed his will just 12 days before his death on December 9. QuadrigaCX co-founder, Michael Patryn, was long rumored to be convicted identity thief Omar Dhanani. That rumor proved to be true.
And there have been reported movements of crypto out of wallets that were supposedly under the sole control of Mr. Cotten since his death.
The truth may lie somewhere in between incompetence and criminality. The courts are likely to get close to it by April 18, when the next court hearing is scheduled.