A Court Date for QuadrigaCX: What to Expect at Tomorrow's Hearing

The troubled crypto exchange QuadrigCX has appealed for creditor protection, setting the stage for a significant court hearing on Feb. 5 in Canada.

"Transparency is going to be critical for Quadriga and providing the wallets addresses is the first step to transparency," she added.

"The Proposed Monitor understands that Quadriga is experiencing a liquidity crisis and has been unable to satisfy withdrawal requests from users. Additionally, Quadriga has been unable to locate a significant amount of cryptocurrency following the death of the Applicants' founder and Chief Executive Officer, Gerald Cotten," the filing states.

The filing notes that the company has not yet been able to verify the details included in Quadriga's initial filing, though it "Has assumed the integrity and truthfulness of the information and explanations provided to it."

In its report, EY explains that a number of factors resulted in Quadriga's current issues, including its lack of a corporate bank account and Cotten's death.

The firm has also recommended that Quadriga receive creditor protection under the Canadian Companies' Creditors Arrangement Act.

Duhaime did question why Quadriga filed for creditor protection in Nova Scotia, rather than British Columbia, where the companies affiliated with the exchange are registered.

"In my opinion, I cannot see a Nova Scotia judge, if he or she is apprised of all of the actual matrix regarding the connections to BC, concluding that a Nova Scotia Court has jurisdiction. It may happen that a Nova Scotia Court accepts jurisdiction but usually a Judge would ask the party to prove the jurisdiction issue, especially in this case where the applicant is seeking an order to prevent litigation so the rights of parties across the country are affected."

EY's report says there are two initial sources of funds that can be recovered quickly: the cash held by Quadriga's payment processor in the form of bank drafts, and any cryptos or fiat held by third-parties.

Quadriga has also not yet asked for a court order to freeze its assets as a form of protection for customers.