Nova Scotia Court Okays QuadrigaCX Bankruptcy Proceedings
QuadrigaCX, the now-defunct Canadian bitcoin trading platform and cryptocurrency exchange, has officially commenced bankruptcy proceedings following approval by Nova Scotia Supreme Court Justice, Michael Wood, according to a CBC report published April 8, 2019.
QuadrigaCX Bankruptcy Proceedings Underway
The ongoing QuadrigaCX fiasco is gradually coming to an end, as the Nova Scotia Supreme Court authorities have ordered the collapsed exchange to begin bankruptcy proceedings with immediate effect.
Per sources close to the matter, the move represents a significant turning point for the 115,000 clients of the Bitcoin trading platform whose $260 million worth of blockchain-based digital assets and fiat money are now stuck on the defunct exchange.
As reported by BTCManager on April 2, 2019, court-appointed monitor, Ernst & Young (EY) made it clear that it was encountering great difficulties investigating the QuadrigaCX case. The restructuring proceedings embarked upon by the embattled exchange at the time has made it almost impossible for the accounting firm to gain access to sensitive documents regarding the operations of the exchange.
Against that backdrop, EY advised Quadriga to move from restructuring to bankruptcy proceedings to hasten the entire settlement process for creditors, while also cutting costs.
With the bankruptcy proceedings underway, Ernst & Young will now have more investigative powers as a trustee, in accordance with the Bankruptcy and Insolvency Act.
Specifically, Ernst & Young will now be able to order all relevant entities to produce the necessary documents needed for its investigation.
Asset Preservation Order Granted
During the Quadriga investigations, the monitor discovered that the late founder of the exchange failed to separate crypto traders’ funds from his finances. Ernst & Young also noted in an earlier report that the founder, Gerarld Cotten, may have used investors’ money to purchase assets outside of QuadrigaCX.
Against that backdrop, the monitor prayed the court to put in place an asset preservation order to prevent the founder’s widow from selling, transferring or removing any of the properties in her possession, as well as those in Cotten’s estate. The court has now granted EY’s wish.
Aside from the cryptoassets the defunct exchange owes its users’, Quadriga also owes investors roughly $70 million in cash and most of these funds are reportedly tied up in bank drafts and several third-party payment processors.
According to CBC, a handful of lawyers representing the third-party payment processors participated in the hearing via teleconference on April 8, 2019, and some of them said they needed more time to process Quadriga’s cash in their possession, while one representative for an unnamed processor argued that the monitor was overreaching its authority.
Judge Wood has asked Ernst & Young to reach a conclusive agreement with Quadriga’s payment processors before the next hearing on April 18, 2019.