QuadrigaCX crypto exchange court case calls for $30m payout
A Canadian judge in Nova Scotia has issued an order for the disbursement of more than $30 million that belonged to the insolvent crypto exchange QuadrigaCX.
According to CBC News, this court decision follows the crash of the exchange in late January after $190 million went missing from clients’ funds.
As FinTech Futures reported last month, the CEO of QuadrigaCX died and up to $190 million in clients’ funds were trapped as a result.
This was followed by a Wall Street Journal (WSJ) report, in which two independent researchers said publicly available transaction records associated with QuadrigaCX suggest the money may be gone, not trapped.
In the latest development, lawyers for the Bank of Montreal and Ernst and Young, which had been appointed by the court to oversee the case, argued that the uncertain origin of cryptocurrency funds raises concerns about possible money laundering.
Elizabeth Pillon, a lawyer representing Ernst and Young, said the banks had made it clear they were in uncharted territory.
“We don’t have the source-of-funds information that the banks are looking for,” she said. “The monitor has serious concerns about finding another institution to hold these funds.”
The Supreme Court judge issued an order that would see QuadrigaCX money deposited in a Royal Bank of Canada account, which Ernst and Young will use to pay for the ongoing court proceedings.
The money could also be used to partially compensate 115,000 users of the QuadrigaCX exchange who are owed $260 million in cash and digital assets.
When QuadrigaCX was in business, it couldn’t get a bank account because of the reluctance of traditional banking institutions, and thus it turned to third-party payment processors to handle their accounts.
In January 2018, CIBC froze the accounts for a payment processor known as Costodian, preventing QuadrigaCX from getting at more than $25 million. The bank said it was unable to determine who the funds belonged to, so it turned to the courts for help.
That money was eventually returned to Costodian and will soon be deposited into the monitor’s Royal Bank account, according to the court order.
Another $5 million in other bank drafts are also expected to be handed to RBC, along with an unspecified amount of money from several third-party processors.
However, the Royal Bank has raised concerns about accepting and distributing the money without “direction and relief” from the court.
The situation around QuadrigaCX is very fluid – with a lot of other activity going on.
Crypto exchange Kraken is offering a $100,000 reward for information about the missing QuadrigaCX funds.
In addition, The Globe and Mail reports that a Quadriga co-founder served time in US for his role in an identity-theft ring. Michael Patryn helped launch Quadriga’s trading platform in 2013 alongside the late Gerald Cotten.