QuadrigaCX- one of the major Canada based crypto exchange, has filed for creditor protection in the Supreme Court of Nova Scotia on 31st Jan 2019. This filing has been done after a prolonged legal and financial set of issues.
The company made an official announcement on its official website about the filing of the application. This application was made in compliance with CCAA- i.e. ‘Companies Creditors Arrangement Act.’ If we go by the reports from PwC, the compliance with the CCAA is more like a good chance for the crypto exchange to steer away from the dark possibilities of bankruptcy. On the other hand it also allows the ‘creditors to receive some form of payment for amounts owing to them by the company.’
There is another revelation in the announcement that on Tuesday i.e. Feb. 5th. the Supreme Court will be requested to appoint the ‘Big Four’ auditing firm- ‘Ernst and Young.’ The firm will act as an independent third party and will be supervising all the proceeding related to the case.
The announcement read as follows-
An application for creditor protection in accordance with the Companies’ Creditors Arrangement Act (CCAA) was filed today in the Nova Scotia Supreme Court to allow us the opportunity to address the significant financial issues that have affected our ability to serve our customers. The Court is being asked at a preliminary hearing on Tuesday February 5 to appoint a monitor, Ernst & Young Inc., as an independent third party to oversee these proceedings.
For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us. Unfortunately, these efforts have not been successful. Further updates will be issued after the hearing.”
Prior to the filings, last year the crypto exchange disputed a sum of approx 19.6 Million U.S. Dollars with Canadian Imperial Bank of Commerce (CIBC.) As per the reports obtained from the Globe and Mail, since January last year, the exchange was not able to access a sum total of 16.3 million dollars of its own funds. This happened because five of the exchange’s accounts were frozen by IBC. These accounts belonged to the exchange’s owner ‘Jose Reyes and its payment processor, Costodian Inc.
On the other hand, CIBC filed a petition to the Ontario Superior Court in order to withhold the funds, so that it can be understood to whom these funds belong to- ‘the Costodian’, ‘the exchange’, or ‘the users who have deposited their funds in the exchange.’ As a result of the request, the Court considered the petition and ruled to confirm the owner of the funds. As per the reports from Cointelegraph, this made CBIC to ‘pass the funds over to the Accountant of the Superior Court in order to identify the owner of the money.’
The already complicated situation got exposed to another layer of challenges, due to the recent death of QuadrigaCX’s founder- ‘Gerry Cotten.’
In recent news article, CryptoNewsZ covered the reaction of the users on the exchange’s ‘maintenance message’ that prevented the users to make any transactions. On 29th Jan, the exchange webpage reads as-
QuadrigaCX Status Update-
Our site is down for maintenance. We apologize for the inconvenience this may cause. We appreciate your patience and will keep you updated as we know more. Thank you.
This announcement leads to the users’ accounts to get inactive which further caused all sorts of the transactions to freeze. The incapability of the users to access their accounts made them voice their thoughts about on social media platforms such as ‘Reddit’ and ‘Twitter’, as per the reports obtained from Cointelegraph. The undertone of these comments revolved around speculations of insolvency, questions on the exchange’s responsibility towards its users, users’ inability to access their accounts since months, and so on. Some of the comments read as-
“Shouldn’t you let your customer know before taking it down?”Another comment read as- “They will declare insolvency sue to an inability to find a suitable bank to host an account and facilitate transfers.”