QuadrigaCX, the largest cryptocurrency exchange in Canada, owes around $190 million to its customers, a court filing shows.
Two weeks ago, QuadrigaCX’s founder and CEO, Gerry Cotten, passed away at the age of 30. He was diagnosed with Crohn’s disease at the age of 24.
On January 31st, the company issued a statement responding to claims and rumours about their inability to serve their customers and users.
Please see our statement regarding the sudden passing of our @QuadrigaCoinEx founder and CEO, Gerry Cotten. A visionary leader who transformed the lives of those around him, he will be greatly
— QuadrigaCX (@QuadrigaCoinEx) January 14, 2019
In order to gain more time to address the “significant financial issues”, the company filled an application for creditor protection in line with the Companies’ Creditors Arrangement Act (CCAA). The application was filled in Canadian’s Nova Scotia Supreme Court.
“For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us. Unfortunately, these efforts have not been successful,” the company stated.
Jennifer Robertson, the wife of the late Cotten, noted in the filling that, as of December 2018, the exchange owes around $250 million CAD ($190 million USD) to its customers. Out of the total amount, around $70 million CAD is owed in fiat currencies.
On the other hand, Quadriga has access to approximately $30 million in bank drafts.
The exchange has around 115,000 users, while it owns around $147 million worth of crypto assets.
Since Cotten’s death, his colleagues did manage to gain access to the exchange’s cold wallets. The majority of assets are being kept in the cold wallets, while “only a minimal amount of coins” are stored in the hot wallet.
As a result, the company is asking for assistance as it “urgently needs a stay of proceedings which will allow Quadriga and its contractors additional time to find whatever stores of cryptocurrency may be available, and also to negotiate the bank drafts available to Quadriga.”
According to Robertson, the company may decide to sell its operating platform in order to raise the needed funds. Accordingly, multiple parties have already contacted Quadriga to express their interest in acquiring the operating platform.
The preliminary hearing is scheduled for Tuesday, February 5th. The company is hoping that a monitor – Ernst & Young Inc. – is appointed by court as an independent third party will oversee these proceedings.
Clash with CIBC
In 2018, the Canadian-based exchange clashed with Canadian Imperial Bank of Commerce (CIBC) after the bank decided to reject several requests from Quadriga for access to around $26 million CAD.
It was reported that CIBC
“Froze the accounts following its inability to ascertain the real owners of the funds and requested the court to take possession of the funds in question”
Following the hearing, a judge decided to side with the CIBC and ordered the court to temporarily take control over the disputed $26 million CAD.
“To put it briefly, CIBC is currently holding nearly $28 [million Canadian dollars] of ours hostage and has been doing so since January,” said Cotten to Coindesk.
The funds are kept in the frozen CIBC account, waiting for the final decision of the court over the ownership of the funds.