A Halifax judge has appointed Miller Thomson LLP and Cox & Palmer to represent users in the restructuring of QuadrigaCX, a Canadian cryptocurrency exchange that has lost millions of customer funds following the death of its founder.
In total, Quadriga’s approximately 115,000 users are owed roughly $250-million – $180-million of which is missing after the death of Quadriga’s chief executive, Gerald Cotten, who died from complications stemming from Crohn’s disease while on his honeymoon in India. Only Mr. Cotten knew where the company stored its cryptocurrency holdings, his widow Jennifer Robertson said in documents filed with the court. Miller Thomson and Cox & Palmer together had the support of 252 creditors with claims of roughly $15-million.
The Miller Thomson and Cox & Palmer team beat out a team that comprised Bennett Jones LLP and McInnes Cooper, as well as a partnership between Osler, Hoskin & Harcourt and Patterson Law.
Justice Michael Wood said he chose the Miller Thomson and Cox & Palmer team because both firms have extensive experience dealing with insolvency and proceedings under the Companies’ Creditors Arrangement Act (CCAA). Miller Thomson also has deeper expertise in cryptocurrency and larger CCAA proceedings, and the firms have expressed a focus on mitigating costs so that creditors can recoup as much of their money as possible.
Miller Thomson, which is headquartered in Toronto, will focus on project management, communication and cryptocurrencies, while Atlantic Canadian law firm Cox & Palmer will take the lead on court appearances and civil procedures. The parties specified that, in order to keep costs down, Toronto lawyers will only appear in court in Halifax if their expertise is required.
They also proposed an initial $250,000 cap on fees, and noted that their plan for communicating with users will include posting information in chat rooms and on social media.
“The rationale is that users are already discussing the Quadriga issue in those places, and it is important to have accurate information available to them,” the court ruling reads.
The team also noted they would advocate for user privacy, as many of Quadriga’s users have said they do not wish to be publicly identified.
Justice Wood noted in his ruling that it’s not unusual for a court to appoint representative counsel and a stakeholder committee in complicated CCAA cases where there are a lot of stakeholders, many of whom would otherwise be unable to participate effectively in the process. He cited the unwinding of Nortel Networks as one such example. "The court appointed representatives for employees and retirees because that vulnerable group had little means to pursue a claim in the complex CCAA proceedings,” he wrote.
In the case of Quadriga, Justice Wood said a committee of users to represent the broader group of creditors needs to be assembled promptly.
“The anecdotal evidence at the hearing is that many people are extremely upset, angry and concerned about dishonest and fraudulent activity,” Justice Wood wrote. “There are reports of death threats being made to people associated with the applicants. All parties agree that this user group needs representation as soon as possible.”
The next court hearing is scheduled for March 5.