The embattled crypto exchange firm, QuadrigaCX, received approval yesterday from a Nova Scotia judge to transition its restructuring proceedings into a bankruptcy case.
The firm, which currently owes its clients over $250 million CAD, had obtained court protection under Canada’s Companies’ Creditors Arrangement Act. During a court hearing on April 8, Justice Michael Wood said he is willing to issue an order that will transition the proceedings, which are currently under the Companies’ Creditors Arrangement Act (CCAA), into a bankruptcy case.
“The possibility that Quadriga will restructure and emerge from CCAA protection appears remote.”
Ernst & Young, which was assigned by the court to administer the search for the missing $180-million worth of missing crypto holdings, suggested the switch to bankruptcy in a report released April 2. Ernst & Young said the shift would lower costs for Quadriga, and could leave more capital with which the firm could repay creditors.
“Given the present circumstances, the possibility that Quadriga will restructure and emerge from CCAA protection appears remote,” the report stated.
At the beginning of the year, the company filed an application with the Supreme Court of Nova Scotia for creditor protection, and last week was granted a 30-day stay in an effort to prevent any lawsuits being filed against the company in the meantime. The passing of Quadriga CEO Gerald Cotten in December had essentially barred all access to Quadriga’s funds and coins, making millions of dollars’ worth of crypto unobtainable.
“During the course of the monitor’s investigation into Quadriga’s business and affairs, the monitor became aware of occurrences where the corporate and personal boundaries between Quadriga and its founder Gerald Cotten were not formally maintained, and it appeared to the monitor that Quadriga funds may have been used to acquire assets held outside the corporate entity,” Ernst & Young’s report stated.
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The report also said Ernst & Young is seeking an order requiring third-party payment processors to hand over records and funds related to Quadriga. During its operation, Quadriga only relied on third-party payment processors, including POSConnect, Billerfy, and VoPay, among others, for client deposits and withdrawals.
The Nova Scotia judge said he is also willing to approve a voluntary agreement that would prevent Cotten’s widow, Jennifer Robertson, from selling or transferring any assets held by her or her late husband’s estate. Those assets include a property management firm and a trust. Cotten and Robertson possessed millions of dollars’ worth of properties in BC and Nova Scotia, as well as a yacht and an airplane, according to The Globe and Mail.
In March, Robertson asked the Nova Scotia Supreme Court to appoint a chief restructuring officer to oversee the remainder of the insolvent cryptocurrency trading platform.
Quadriga’s next court hearing is scheduled for April 18.