QuadrigaCX Crypto Exchange Could Soon Be Placed in Bankruptcy

Ernst and Young, the court-appointed monitor for collapsed Canadian crypto exchange QuadrigaCX, has proposed transitioning the company from a restructuring process to bankruptcy proceedings.

In a new report posted Tuesday, EY said that the exchange's creditors "Will benefit" from converting its current restructuring process under the Companies' Creditors Arrangement Act to a new one under the Bankruptcy and Insolvency Act.

"As set out in previous reports of the Monitor, the current objective of these CCAA proceedings is data and asset recovery. Given the present circumstances, the possibility that Quadriga will restructure and emerge from CCAA protection appears remote."

EY's work to recover Quadriga's missing or frozen $190 million in crypto can still occur under the BIA. The exchange first reported at the end of January that it was unable to locate some $136 million in crypto and needed assistance pulling another $53 million from third-party payment processors.

There are a number of benefits to moving for bankruptcy, EY said, including allowing Quadriga to sell any valuable assets, reducing governance issues by removing the need for a chief restructuring officer or directors, allowing representative counsel to continue to participate and giving the exchange's trustee "Additional investigatory powers" without requiring court orders.

In its report, EY indicated that its research into Quadriga's missing funds might be nearing an end.

In a previous report, EY said that the cold wallets Quadriga used to store bitcoin were empty, and that the exchange was unsure where the missing bitcoin could be.

Tuesday's report did discuss a number of third-party payment processors holding fiat currencies on Quadriga's behalf.

Perhaps more notably, one payment processor which conducted business with Quadriga is operated by Jennifer Robertson, the widow of Quadriga founder Gerald Cotten.

Using the asset preservation order instead allows EY to continue to investigate Quadriga, and sell any assets that are recoverable for the exchange's creditors.