Canadian crypto exchange QuadrigaCX to file for bankruptcy

Troubled cryptocurrency exchange QuadrigaCX is going to file for bankruptcy by next week, CoinDesk reported.

On Monday, Nova Source Supreme Court Judge Michael Wood ruled that the Canadian exchange should transition into bankruptcy in the forthcoming days.

QuadrigaCX ran into problems after its founder Gerald Cotten passed away in December and with this, it lost access to millions of dollars worth of customer funds.

The exchange has been operating under the Companies’ Creditors Arrangement Act (CCAA) since the end of January. It said at the time that it could not access around $136 million in cryptocurrencies and needed help to reclaim another $53 million in fiat held by third-party payment processors. The court appointed a monitor – Ernst & Young – as an independent third party to oversee the proceedings.

Wood also granted an asset preservation order which covers the Cotten estate and the assets held by his widow Jennifer Robertson. Robertson retains the ability to send or receive funds through her corporate and personal accounts with the Bank of Nova Scotia, subject to supervision by EY.

“All of Robertson’s other assets, including those held by her firms Robertson Nova Consulting Inc., Robertson Nova Property Management Inc. and the Seaglass Trust, will be frozen,” CoinDesk said.

Last week, EY recommended the transition of QuadrigaCX’s CCAA proceedings into proceedings under the Bankruptcy and Insolvency Act (BIA), saying:

“Given the present circumstances, the possibility that Quadriga will restructure and emerge from CCAA protection appears remote. The ongoing investigation to locate and recover assets for distribution to creditors with the intent of optimizing recoveries for the Applicants’ stakeholders can be efficiently administered in a proceeding under the BIA.”

EY had also pointed out that “Quadriga funds may have been used to acquire assets held outside the corporate entity,” suggesting possible misuse of funds.

Once the transition to bankruptcy takes place, EY will become QuadrigaCX’s trustee and will have additional investigative powers over the missing funds. EY’s fifth progress report on the matter is expected to be published by April 18.

According to CoinDesk, the stay of proceeding shielding QuadrigaCX and its directors from lawsuits will remain in place for some more time. A hearing on extending this stay was previously scheduled for April 18.