Cryptocurrency exchange owner Quadriga Fintech Solutions Corp. is moving into bankruptcy proceedings.
The embattled Vancouver-based firm was given the go-ahead in a Nova Scotia Supreme Court Monday to transition from court-approved creditor protection to a bankruptcy process, a move that aims to help cut costs and facilitate recovery of assets from creditors.
Quadriga owes about 115,000 customers some $260 million after its founder Gerald Cotten died in December without telling anyone how to access the cryptocurrencies held for clients. Quadriga’s platform shut down on Jan. 28 and by Feb. 5 gained court protection under Canada’s Companies’ Creditors Arrangement Act, with Ernst & Young acting as a monitor for the process.
Ernst & Young said in an April 1 report that the chance of Quadriga emerging from restructuring "appears remote" and the investigation to recover assets can be handled more efficiently in bankruptcy. Bankruptcy would be more cost effective and also allow the trustee more investigatory powers, including the right to compel production of documents and seek examination of parties under oath, the monitor said. It would also permit the potential sale of assets, such as Quadriga’s operating platform, Ernst & Young added.
Cotten ran Quadriga mostly from his laptop and his sudden death while traveling in India threw the business into disarray. Speculation has swirled around the firm as a series of peculiar details have filtered out, including that digital storage accounts used by Quadriga to hold Bitcoin for clients were empty for months before Cotten’s death.
A freeze on assets held by Cotten’s estate, his widow Jennifer Robertson, Seaglass Trust, Robertson Nova Consulting Inc. and Robertson Nova Property Management Inc. was also approved. The law firm Stewart McKelvey was removed as counsel for applicants.
The next hearing to discuss lingering issues from the CCAA process, including those tied to third-party payments processors, is scheduled for April 18.