Ernst & Young Argues That Crypto Exchange QuadrigaCX Should Be Placed in Bankruptcy

Big Four audit firm Ernst & Young has argued that the now-shuttered Canadian crypto exchange QuadrigaCX should be placed in bankruptcy instead of being restructured as part of ongoing creditor protection proceedings.

EY proposed the course of action in its "Fourth Report of the Monitor" filed with the Supreme Court of Nova Scotia on April 1.

As previously reported, QuadrigaCX reported it had lost access to its cold wallet holdings following the death of its founder, Gerald Cotten, in December 2018 - Cotten having ostensibly been the sole person with access to the wallets' corresponding keys.

With the reportedly inaccessible crypto accounting for the vast majority of the exchange's assets, QuadrigaCX owes over $198.4 million to an estimated 115,000 users.

In the auditor's fourth report as Monitor for the case, EY's legal team argues that the ongoing restructuring process for QuadrigaCX under the Companies' Creditors Arrangement Act should shift to an alternative process under the Bankruptcy and Insolvency Act.

The benefits of shifting to proceedings under the BIA, the report argues, include the fact that bankruptcy "Would allow for the potential sale of assets, including but not limited to Quadriga's operating platform," as well as streamlining administrative burdens and cutting procedural costs.

The report argues that transitioning to BIA would provide EY with "Enhanced investigative powers" in its prospective role as trustee-in-bankruptcy for the exchange.

BIA proceedings would remove the onus of formal updates to the court - as is currently required under CCAA - with the trustee prospectively providing reports directly to affected users during the bankruptcy.

EY's report further explains its ongoing investigations into QuadrigaCX's missing funds, with reference to several third-party payment processors currently holding fiat currencies on Quadriga's behalf.

As previously reported, EY's last report was published this March, revealing details of the auditor's ongoing investigations into wallets and transactions associated with the exchange.