QuadrigaCX, the Canadian crypto exchange that sank after its CEO and founder’s death early last year, has only $21 million in assets, but owes investors $160 million, its court-appointed monitor and trustee revealed.
The Big Four accounting company Ernst and Young’s recent study (EY) describes three exchange-affiliated legal entities — Quadriga Fintech Solutions Corp., Whiteside Capital Corporation and 0984750 B.C. Ltd., as bankrupt firms.
Debt and assets are distributed across these three subsidiaries. As a consequence, each organization does have its own asset and liabilities register, though overlapping. As of April 12, 2019:
“There is a material discrepancy between the declared fiat and cryptocurrency commitments” owing to distinct properties, creditors and recognized resources, says George Kinsman, the EY executive serving as the supervisor and treasurer. Kinsman also quoted substandard accounting as a problem EY confronted when collecting these figures together.
Quadriga began a voluntary recovery process at the end of January, when Jennifer Robertson, widow of Quadriga founder Gerald Cotten, stated in an court documents that the exchange was unable to open its cold or offline crypto wallets after his demise. EY was also unable to find any cryptocurrencies in Quadriga’s designated cold wallet locations besides the 103 Bitcoin inadvertently transmitted from a hot wallet.
EY also retains about $500,000 in cryptocurrency retrieved from Quadriga’s hot or online wallets’ and numerous other locations’ Crypto wise, EY holds 61 Bitcoin, 33 Bitcoin cash 2,661 Bitcoin gold 851 Litecoin and 960 Ether. The study did not discuss what advancement, if any, EY made in finding other disappeared cryptos of the exchange.
While Robertson originally expected that the exchange could have a maximum of 115,000 customers, Kinsman stated in the fresh study that Miller Thomson, the court-appointed advisory attorney for customers of the exchange, had submitted an additional demand from 76,319.
Miller Thomson also provided the $214,618,928 CAD amount that is used for calculating debts. Along with Quadriga’s clients, Robertson is mentioned as a protected lender and is owed $300,000 CAD ($ 223,500 USD) depending on the cost of beginning the civil recovery procedure, although Kinsman said he anticipates the demand to be disputed. Costodian, Quadriga’s payment processing company, also asserted $774,214 CAD ($ 577,200) in handling charges, although this complaint has yet to be addressed in trial.
Quadriga was formally proclaimed bankrupt in early April after the justice of Nova Scotia Supreme court, Michael Wood, granted permission, following EY’s suggestion that the firm should be declared bankrupt previously that month. Insolvency “would enable prospective asset sales, including but not restricted to Quadriga’s operating platform,” as well as simplifying managerial complexities and lowering procedural expenses.
As earlier stated, after co-founder Gerald Cotten’s death, Quadriga applied for creditor protection when it lost control over its cold wallets and associated keys, which supposedly contained customers ‘ assets. In March, EY recognized six distinct crypto wallets used mainly to hold Bitcoin (BTC), the most-used cryptocurrency on the platform. Besides an unintentional Bitcoin transaction worth approximately $500,000, there have been no deposits in the wallet since April 2018.