The latest in 21CRYPTOS’ coverage of the QuadrigaCX nightmare – the audit firm Ernst & Young (EY) strongly believes that Canadian crypto exchange QuadrigaCX should file for bankruptcy rather than restructure itself using the creditor protection proceedings. EY maintains this position due to the information found in its “Fourth Report of the Monitor” which on April 1 was sent to Nova Scotia Supreme Court. EY is the court-appointed monitor in the QuadrigaCX case. Read our previous article on thoughts from Bermuda’s premier here.
After QuadrigaCX lost access to exchange cold wallet and all crypto funds following the death of its CEO Gerald Cotten in December last year, QuadrigaCX has filed for Companies’ Creditors Arrangement Act (CCAA) protection due to Cotten being the only one with the wallets’ corresponding private keys.
Filing for bankruptcy instead of a restructuring is the best way out
In a recent report obtained this past Tuesday, EY maintains that the exchange’s users “will benefit” from changing the actual restructuring process under the CCAA to a new process with the Bankruptcy and Insolvency Act (BIA).
“Given the present circumstances, the possibility that QuadrigaCX will restructure and emerge from CCAA protection appears remote. The ongoing investigation to locate and recover assets for distribution to creditors with the intent of optimizing recoveries for the Applicants’ stakeholders can be efficiently administered in a proceeding under the BIA,” the report by EY said.
In the document, EY claims that its investigation into Quadriga’s lost funds would be close to an end. In the following weeks they should have a final report. The court would then know the status, however, Tuesday’s document does not give an update on the exchange’s lost funds.
Looking to obtain something in return for exchange creditors
“Quadriga funds may have been used to acquire assets held outside the corporate entity,” EY wrote.
If this gets approved, the new order can restrict Cotton’s widow Robertson or any of the companies from doing any business or selling their assets, EY wrote. Before the conversation with Robertson and her counsel, EY was filing a mareva injunction, which, regardless of a court order, would have frozen her assets. Changing the filing with asset preservation order instead, EY has the authority to keep on investigating Quadriga and recover any money for exchange’s creditors selling the remaining exchange assets.