It's unlikely that a Vancouver-based cryptocurrency exchange will make the transition from bankruptcy protection to a fully operating entity.
That's because a Nova Scotia Supreme Court judge has given the green light to Quadriga Fintech Solutions Corp. monitor Ernst & Young to move the company into full-fledged bankruptcy proceedings.
This means that Quadriga will come under the Bankruptcy and Insolvency Act and transition out of Companies' Creditors Arrangement Act proceedings.
That's because, according to Ernst & Young, there is a "remote" possibility of Quadriga being able to emerge from CCAA protection.
Founder Gerald Cotten died in India in December. According to Quadriga, he's the only person with passwords to access clients' cryptocurrencies.
Quadriga owes $260 million to approximately 115,000 customers.
"The ongoing investigation to locate and recover assets for distribution to creditors with the intent of optimizing recoveries for the Applicants' stakeholders can be efficiently administered in a proceeding under the BIA," the monitor stated. "A bankruptcy would allow for the sale of assets, including but not limited to Quadriga's operating platform, should it be determined to be of value and if such a sale was determined to be feasible and beneficial."
Moreover, this was deemed to be a more cost-effective option in part because there would be no requirement for formal updates to the court, which must be done under CCAA legislation.
In a report presented in court, Ernst & Young recommended that Cotten's widow, Jennifer Robertson, and Tom Beazley continue as directors of Quadriga and its associated companies, but that Ernst & Young would receive expanded powers as a "super monitor".
The document reveals that the monitor has "requested additional details and information from Jennifer Robertson in her capacity as executor of the state of Gerald Cotten (the "Cotten Estate"), as well as information relating to Ms. Robertson personally and her corporate or trust entities which may have been used by Ms. Robertson and/or Mr. Cotten to maintain assets".
There is also an "asset preservation order". It would prohibit parties "from selling, removing, dissipating, alienating, transferring, assigning, encumbering, or similarly dealing with any assets of the Preserving Parties, wherever situate[d]," the document states. "Ms. Robertson and her counsel have agreed to prepare and disclose a list of relevant assets directly to the Monitor."
The document states that a company called Robertson Nova Consulting Inc. acted as a third-party payment processor for Quadriga. Robertson is the sole director.
Robertson and Cotten used this company's bank accounts to make payments on behalf of Quadriga, but according to Ernst & Young, it doesn't hold any of Quadriga's property.