The situation escalated from bad to worse for the exchange and its creditors after the 30-year old founder Gerald Cotten shockingly died due to Crohn’s disease whilst on his trip to India, according to a statement released by the founder’s wife, Jennifer Robertson.
Creditors were sent into a fit a panic because Cotten was “primarily responsible for managing Quadriga and held a significant amount of institutional knowledge regarding the QCX Platform and Quadriga’s business,” as confirmed by an independent third party report.
Just last week, QuadrigaCX’s board of directors issued a statement that there were “significant financial issues,” brewing and hence the operations of the exchange were not optimal. The Nova Scotia Supreme Court also appointed the global audit firm Ernst & Young Inc. to act as an independent third party to supervise creditor protection.
Following the proceedings of February 5, the exchange took down normal proceedings of its website and replaced it with information about the Creditor Protection norms granted to QuadrigaCX.
In the notice issued by the board of directors last week, QuadrigaCX primarily mentioned liquidity issues that required them to source their crypto-reserves held in cold-wallets and for financial institutions to accept their bank draft. However, since the above solutions could not be materialized, the company added:
“Since we were unable to resolve these issues in a timely fashion, we did not want trading to continue on our platform. We filed for creditor protection to help resolve these matters and preserve the interests of our customers.”
They further added that:
“What we can tell you is that the CCAA process will allow QuadrigaCX to keep all options open to attempt to maximize the funds available for the company’s stakeholders. We will provide further updates to the extent possible.”
In addition to the above notice, QuadrigaCX also added a list of 12 questions and answers for uninformed customers on the creditor protection norms granted to the exchange.
Justice Michael Wood of the Nova Scotia Supreme Court has given QuadrigaCX a 30-day stay of proceedings in order to prevent the exchange from being hit with any lawsuits. Furthermore, the court filings show that users have a significant amount of claim from the exchange, with the largest one reportedly being around $70 million.
Back in October, the exchange was caught in another legal dispute with the Canadian Imperial Bank of Commerce [CIBC], which it accused of withholding and preventing access of funds worth $21.6 million. Five accounts in total were frozen by the CIBC under the name Costodian Inc, the exchange’s payment partner, citing discrepancies regarding the identity of the users.