Encrypted Exchange of Quadriga Files for Creditor Protection

Canada's largest cryptocurrency exchange claims to have sought creditor protection because it seeks to resolve "significant financial problems" that prevent it from serving its clients.

After several days of maintenance, the Vancouver-based QuadrigaCX website now carries the message that the company has filed an application under the Companies' Creditors Arrangement Act (CCAA) of the Supreme Court of Canada. New Scotland. A preliminary hearing will be held on February 5, at which time the court will be asked to appoint Ernst & Young Inc. as a supervisor to oversee the proceedings, according to the notice.

Customers have been complaining for months about the difficulty of withdrawing funds from their Quadriga accounts. The Globe has already spoken to four of these clients, but none of them wanted to be identified by name for confidentiality reasons. Some were waiting to withdraw tens of thousands of dollars.

Quadriga has previously blamed the delays on its clients for a legal battle with Canadian Imperial Bank of Commerce. According to court documents, the bank froze $ 26 million in January 2018, at the heart of the dispute. It was held in accounts belonging to the exchange's payment processor, Costodian Inc., and to its owner, Jose Reyes, but CIBC said it was unable to determine who the money belonged to.

Quadriga had argued in court that the group was the undisputed owner of the majority of the funds and that CIBC was wrong to freeze the accounts. Last November, the contentious funds were turned over to the Ontario Superior Court of Justice for resolution.

More recently, the exchange announced that its CEO, Gerald Cotten, had died last month from complications of Crohn's disease while he was abroad in India where he was building an orphanage.

"Over the last few weeks, we have worked hard to solve our liquidity problems, which include trying to locate and secure our very important cryptocurrency reserves … and to call on a financial institution to accept bills of exchange. bank which will be transferred to us. Unfortunately, these efforts have not succeeded, "said Thursday the company on its website.

Dean Skurka, Vice President of Finance and Compliance for the Canadian Bitbuy Cryptocurrency Platform, has expressed concern that investors who still have money locked into their Quadriga trading account will not be able to recover the full amount of their funds. Mr. Skurka previously worked in the restructuring and insolvency groups at Fuller Landau, James Williams & Associates and Crowe Soberman, and has participated in numerous restructurings.

"These procedures will result in a lengthy process, which will likely result in a significant loss for end-users," Skurka said in an email. "Other players will have a long way to go to regain the confidence of Canadian consumers."