QuadrigaCX investigation recovers $28 million of missing assets


Efforts to recover more than $200 million in cash and cryptocurrency from the former trading platform QuadrigaCX have resulted in only $28 million in recuperated assets, nearly all of which is in the form of cash.

“A complete and fulsome review of Quadriga’s financial affairs will take considerable time and effort to pursue and may not be possible or cost-effective to complete.”

Ernst and Young (EY), which was appointed to oversee the search for the missing money, released a preliminary report on the investigation, which began three months ago. The report said a full review of Quadriga’s finances might be impossible, due to the company’s inadequate accounting and bookkeeping. As of last month, Quadriga, and its associated companies, owed creditors $215.7 million. The report listed several obstacles through the investigation, among them were uncooperative from third-party payment processors (TPPPs) and the lack of accounting records available to review.

During its operation, Quadriga only relied on third-party payment processors, including POSConnect, Billerfy, and VoPay, among others, for client deposits and withdrawals.

“The investigation has proved to be a challenging process due to the lack of individuals having institutional knowledge of the operations, the limited books and records available to review, no company controlled bank accounts, Quadriga’s usage and reliance on multiple TPPP’s to facilitate its fiat treasury functions, limited cooperation from TPPP’s to assist the monitor with its investigation and limited assistance from third-party cryptocurrency exchanges who received cryptocurrency transfers initiated by Mr. Cotton,” the report stated.

A total of 76,319 unsecured creditors, nearly all of whom are Quadriga clients, have claimed they are owed $214.6 million, according to the report. According to the Canadian Press, EY also said 14 user accounts were created internally at Quadriga, under aliases. A few of these accounts were used to trade cryptocurrency, drawing from deposits that “may have been artificially created,” EY said. Back in March, Ernst and Young said they had found several cold wallets, meaning offline storage reserves, but all of them were empty.

RELATED: How can Canada prevent another QuadrigaCX?

“A complete and fulsome review of Quadriga’s financial affairs will take considerable time and
effort to pursue and may not be possible or cost-effective to complete given the lack of available information, the volume of transactions processed and the number of TPPP’s and cryptocurrency exchanges involved, many of whom to date, have not fully cooperated with the Monitors investigation,” 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 was granted a 30-day stay in an effort to prevent any lawsuits being filed against the company in the meantime. The death 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.

In April, EY suggested that Quadriga should switch to bankruptcy in order to lower the costs for the platform, leaving more capital with which the firm could repay creditors. In that same report, EY said the possibility that Quadriga could reemerge from court protection under Canada’s Companies’ Creditors Arrangement Act, were “remote.”

EY said it’s continuing its process of salvaging assets from Quadriga’s payment processors and other crypto exchanges. Another investigation report is expected to be submitted within the next two months.

Image courtesy Unsplash.

Isabelle Kirkwood

Isabelle Kirkwood

Isabelle is a Vancouver-based writer with 5+ years of experience in communications and journalism and a lifelong passion for telling stories. For over two years, she has reported on all sides of the Canadian startup ecosystem, from landmark venture deals to public policy, telling the stories of the founders putting Canadian tech on the map.

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