QuadrigaCX Exchange Applies for Creditor Protection
Canadian cryptocurrency exchange QuadrigaCX has applied for creditor protection in accordance with the Companies' Creditors Arrangement Act (CCAA) in the Nova Scotia Supreme Court following a “temporary shutdown.” This comes after the exchange’s admitted inability to “locate and secure our very significant cryptocurrency reserves held in cold wallets,” but in an official announcement they added that “these efforts have not been successful.”
According to professional services company PwC Canada “the CCAA presents an opportunity for the exchange, previously ranked 154th by 24 hour trading volume on Coinmarketcap, to avoid bankruptcy and allows the creditors to receive some form of payment for amounts owing to them by the company.” The official announcement also states that on February 5th, the court will be asked to appoint ‘Big Four’ auditing firm EY as an independent third party to monitor the proceedings.
The cryptocurrency exchange has had issues with customers complaining about withdrawal problems with both fiat and cryptocurrencies on social media for some time now. At least part of those stem from a legal battle with Canadian Imperial Bank of Commerce (CIBC). In October 2018, the exchange disputed a USD 19.6 million sum with the CIBC. According to local news outlets, QuadrigaCX had been experiencing difficulties accessing USD 16.3 million of its funds since January last year, when the CIBC froze five accounts belonging to Jose Reyes, the exchange’s owner, and its payment processor, Costodian Inc.
A court ultimately ruled that QuadrigaCX should get the funds back, minus a portion, but the exchange seems unable to find banking partner to endorse the drafts, meaning it was unable to send any fiat currencies to the exchange and therefore the exchange could not process withdrawals. Another part of the problem comes from the announcement that on December 9th 2018, the exchange’s CEO Gerald Cotten passed away while on a trip to India.
The community is both worried and outraged, as it seems like the chances of them getting their funds back are slimmer with each passing day. “I’m so glad I listened to everyone on Reddit that said never keep your crypto on exchanges. I dodged a bullet,” writes Reddit user u/wiiiildbill. User u/SimpleSteve9 adds, “Wow, if it weren't for the whole Proof of Keys Jan. 3 event, I would've lost 30 Litecoin to this. I just assumed since this was in my opinion the best exchange in Canada that I wouldn't have to worry about leaving a few coins on there.”
This is also the common consensus in the QuadrigaCX Customers Telegram group. “Not your keys, not your Bitcoin,” users remind each other, and a user named Krishna adds, “If they really f*cked that up then I hope it’s a precedent for future regulations on exchanges.”