Canada’s biggest securities regulator said on Friday that it was looking into Quadriga CX, as concerns grow that a regulatory gap leaves investors in the digital platform unprotected against potential losses.
The statement comes a day after British Columbia Securities Commission, the province’s securities regulator, said it does not regulate Quadriga CX, whose founder died in December, trapping millions of dollars in cryptocurrencies in its accounts.
“Given the potential harm to Ontario investors, we are looking into this matter and have already been in contact with the monitor,” the Ontario Securities Commission said in a statement e-mailed to Reuters.
OSC spokeswoman Kristen Rose declined to say if it was an investigation.
The Quadriga CX situation highlights a regulatory vacuum for the cryptocurrency industry in Canada and raises questions about who would be held accountable for any potential losses.
The OSC could review the matter to see if Quadriga has breached any securities laws, said Allan Goodman, co-chair of the technology group at law firm Goodmans LLP. “For example, should (Quadriga) have been registered as an exchange and were any securities laws breached with respect to the trading of the coins on the exchange?”
About $180-million in cryptocurrencies have been frozen in Quadriga’s user accounts since its founder Gerald Cotten, the only person with the password to gain access, died suddenly in December.
Goodman said in the event of securities law violations, the OSC could bring an enforcement action against the company or its officers and directors. “If ultimately successful, one would suppose any monetary recovery could be used to address possible losses for customers,” he said.
On Tuesday, a judge ordered a 30-day stay on claims against the firm, providing a temporary reprieve from lawsuits from creditors. Ernst & Young was appointed by the court to help the company with restructuring.
The platform, a trading venue for cryptocurrencies such as Bitcoin, Litecoin and Ethereum, had previously filed for creditor protection in the Nova Scotia Supreme Court.