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Maurice Chibadon, a lawyer with Stewart McKelvey, attends the Supreme Court of Nova Scotia. Canada's largest cryptocurrency exchange is seeking creditor protection following the sudden death of its founder and chief executive in December and a cryptocurrency missing from the bankruptcy court. about $ 190 million in Halifax on Tuesday. February 5, 2019. The bizarre case involving the QuadrigaCX cryptocurrency company is expected to be referred to a Halifax court today. The Supreme Court of Nova Scotia has been asked to determine which law firms will represent 115,000 QuadrigaCX customers, to whom it owes up to $ 260 million in cash and cryptocurrency.
Andrew Vaughan / THE CANADIAN PRESS
HALIFAX – QuadrigaCX, which was one of the largest cryptocurrency markets in Canada, is now cash-strapped.
"To this day we have nothing left," Maurice Chibadon, a lawyer representing the Vancouver-based insolvent company, told the Nova Scotia Supreme Court on Thursday.
Chibadon said Jennifer Robertson, a Halifax resident and widow of the late CEO of the company, Gerald Cotten, is expected to release more money. It had also already paid $ 150,000 to cover operating costs, according to recent court documents.
The company's precarious financial situation was revealed as more than a dozen lawyers gathered in the Halifax courtroom to represent their QuadrigaCX users to whom it owed $ 260 million.
In total, three teams of lawyers have asked the court to represent 115,000 traders in cryptocurrency, and 70 million USD in cash and 190 million USD in Bitcoins and other digital badets.
Judge Michael Wood said he would make a written decision within a week.
The law firms chosen as so-called representative lawyers will work closely with the QuadrigaCX users involved, as a court-appointed monitor continues to look for the amounts owed to them.
The stock market closed on Jan. 28 after Cotten's sudden death on Dec. 9 while traveling in India. He ran his five-year business from his home north of Halifax.
Court documents say missing cryptocurrency, worth $ 190 million, is locked in offline digital wallets – but they are out of reach because Cotten was the only person to own encrypted access codes.
At Thursday's hearing, a lawyer representing the controller, Ernst and Young, said the lawyers' fees at this stage should be capped at $ 100,000.
Under an order issued February 5 by a court that granted QuadrigaCX the protection of its creditors, the company is required to pay all legal fees.
"For us, the cost issue is important," said Chibadon.
Each of the competing lawyers' teams consists of representatives from one firm in Toronto and another in Halifax.
Bennett Jones of Toronto and McInnes Cooper of Halifax were the first to apply. This team has already registered 181 users to whom it owed approximately 22 million dollars.
McInnes Cooper's lawyer, Benjamin Durnford, said that one of the key roles of the representative lawyer will be to communicate with the relevant users scattered around the world.
He added that many of these users communicate via online chat rooms, such as Reddit, where anonymous participants often exchange rumors and innuendo.
Reddit is full of speculation about what happened to the money and circumstances of Cotten's death in Jaipur, India. Robertson said her husband had died from Crohn's complications.
"It's a case that has to be litigated in court, not in front of the cat," Durnford said, referring to a law firm that suggested that users could be contacted via sites such as Reddit and Telegram.
Bennett Jones' lawyer Raj Sahni also said it was a bad idea.
"The use of discussion forums as a communication forum is inappropriate," he told the court, suggesting that these sites were rife with mischief and that those defending their own goals.
"They are not a secure forum."
Miller Thomson in Toronto and Cox & Palmer in Halifax represent 252 creditors and approximately $ 15 million.
Cox & Palmer's partner, Gavin MacDonald, said the use of discussion forums was needed to "replace the wrong information with facts."
"These forums are a fact – people use them a lot," he told the court. "To leave him alone to fest is … a bad idea."
Meanwhile, Osler, Hoskin & Harcourt, based in Toronto, and Patterson Law in Halifax, represent 134 affected users and owed about $ 19 million.
This team told the judge that she had an advantage because one of her lawyers is considered an expert in cryptocurrencies.
"We do not need to familiarize ourselves with cryptocurrency," said attorney Evan Thomas, specializing in blockchain technologies. "We already have that."
A large portion of the $ 70 million in hard currency due to users is linked to bank drafts held by nine third-party payment processors who worked with QuadrigaCX.
According to Robertson, one of these processors – Costodian Inc., based in Toronto – has five bank drafts worth $ 25.2 million.
Chibadon said that he wanted the court involved "to bring people to the table."
QuadrigaCX has used third-party payment processors, as the traditional banking sector remains reluctant to manage revenues from the cryptocurrency sector, which is not regulated in Canada.
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