Thursday , February 25 2021

QuadrigaCX files of Canadian cryptocurrency exchange for protection of creditors in Nova Scotia

After months of financial and legal troubles, the main Canadian exchange of crypto-coins, QuadrigaCX has filed a petition for protection against creditors, according to an official announcement on January 31.

According to a statement on the stock exchange's website, the company filed a claim for creditor protection at the Nova Scotia Supreme Court in accordance with the Companies Creditors Agreements Act (CCAA). According to PwC Canada, "the CCAA presents an opportunity for the company to avoid bankruptcy and allows creditors to receive some form of payment of the amounts owed to them by the company."

The announcement also states that on February 5, the court will be asked to appoint Ernst & Young's "Big Four" audit firm as an independent third party to monitor the suit.

The filing will supposedly give QuadirgaCX "the opportunity to address significant financial issues that have affected our ability to serve our customers." The company claims that attempts to "locate and secure our very significant reserves of crypto-coins held in cold wallets" were unsuccessful. As such, they were not able to satisfy the balances of the clients or to secure services from a financial institution to accept bank withdrawals.

In October of 2018, the exchange disputed an amount of US $ 19.6 million with the Canadian Imperial Bank of Commerce (CIBC). According to the Canadian newspaper Globe and Mail, QuadrigaCX had been struggling to access $ 16.3 million of its funds since January, when CIBC froze five accounts owned by Jose Reyes, the purse-owner, and its payment processor , Costodian Inc.

CIBC subsequently asked the Ontario High Court to withhold funds and determine whether they belonged to Costodian, the exchange, or the users who deposited the funds. The court ruled in favor of the bank, stating that the owner of the funds was not clearly established. The CIBC was then required to pass the appeals to the Superior Court Accountant to identify the owner.

What further complicates the exchange situation is the apparent death of its founder, Gerry Cotten. After an announcement of Cotten's demise, some users asked for proof of death, while one even posited the theory that the stock exchange could not access the assets in cold storage, since the keys were known only to Cotten.

Platform users would have been unable to access or withdraw their funds for months. Some speculated whether the platform had become insolvent earlier this week when QuadrigaCX appeared to be down for maintenance. One commenter posted on Reddit, "They will declare insolvency due to an inability to find a suitable bank to host an account and facilitate transfers."

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