Canada’s largest cryptocurrency exchange says it has applied for creditor protection as it seeks to address “significant financial issues” that have prevented it from being able to serve its customers.
After being down for maintenance for several days, the website of Vancouver-based QuadrigaCX now bears a message to customers that says the company has filed an application in accordance with the Companies’ Creditors Arrangement Act (CCAA) in the Nova Scotia Supreme Court. A preliminary hearing will be held on Feb. 5 when the court will be asked to appoint Ernst & Young Inc. as monitor to oversee the proceedings, according to the notice.
Customers have been complaining for months about difficulties trying to withdraw funds from their Quadriga accounts. The Globe has spoken to four such customers in the past, though none of them wished to be identified by name because of privacy concerns. Some had been waiting to withdraw tens of thousands of dollars.
Quadriga has previously blamed a legal battle with Canadian Imperial Bank of Commerce for the delays that customers were experiencing. According to court documents, at the heart of the dispute was $26-million that the bank froze in January, 2018. It was held in accounts belonging to the exchange’s payment processor, Costodian Inc., and its owner, Jose Reyes, but CIBC said it was unable to determine who the money belonged to.
Quadriga had argued in court documents that it was the undisputed owner of the majority of the funds and that CIBC was wrong to freeze the accounts. Last November, the disputed funds were handed over to the Ontario Superior Court, so that the court could sort out the matter.
More recently, the exchange announced that its CEO Gerald Cotten died last month from complications arising from Crohn’s disease while abroad in India where he was building an orphanage.
“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 … 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 said on its website Thursday.
Dean Skurka, vice-president of finance and compliance at Canadian cryptocurrency trading platform Bitbuy, said he’s concerned that investors who still have money locked up in their Quadriga trading accounts won’t be able to regain all of their funds. Mr. Skurka previously worked in the restructuring and insolvency groups at Fuller Landau, James Williams & Associates and Crowe Soberman, and has been involved in many restructurings.
“These proceedings will result in a long process, which will likely result in end users experiencing significant loss,” Mr. Skurka said in an e-mail. “There will be a long road ahead for the remaining players to regain the confidence of Canadian consumers.”