More bad news for Canada’s cryptocurrency market.
A bid to restructure Vancouver-based QuadrigaCX, one of Canada's biggest cryptocurrency exchanges, has failed and the virtual company announced that it has entered bankruptcy proceedings.
The move, approved late Monday by a Nova Scotia judge, is a negative situation for the 115,000 users who are owed more than $260 million in cash and cryptocurrency, including major industry players Bitcoin and Ethereum.
The transition to the bankruptcy process means that Ernst and Young, the court-ordered monitor overseeing the case, will be granted enhanced investigative powers as a trustee under Canada’s federal Bankruptcy and Insolvency Act.
Ernst and Young now has the right to compel production of documents and testimony from witnesses. Quadriga Fintech Solutions Corp. and its related companies were granted protection from their creditors under the Companies' Creditors Arrangement Act (CCAA) on February 5 of this year, but it quickly became clear that the company had no real assets — and that the process of recovering missing funds would be difficult.
The exchange stopped operating on January 28, more than a month after its lone director, Gerald Cotten of Fall River, Nova Scotia, died suddenly while travelling in Jaipur, India. Soon after his death was announced, court documents revealed he was the only QuadrigaCX employee who knew the encrypted passcodes needed to get at $190 million in cryptocurrency locked in offline digital wallets. Few of those digital assets have been recovered.
Anonymous QuadrigaCX users continue to use social media to trade in allegations, rumours and elaborate conspiracy theories. Meanwhile, in a report released last week, Ernst and Young said it had determined that Cotten was mixing his personal and corporate finances, although no details have been provided. Ernst and Young asked Nova Scotia Supreme Court Justice Michael Wood for a so-called asset preservation order, which he granted in court on Monday.
