Judge Approves Fee Claims for QuadrigaCX Funds Recovery from Creditors

The QuadrigaCX case might be nearing resolution.

A judge in Canada approved over $1.6 million in fees for firms involved in the recovery of funds from the collapsed Canadian digital exchange QuadrigaCX. Darlene Jamieson, a judge in the Nova Scotia Supreme Court, approved all fees incurred Ernst & Young (EY) and various law firms involved in the case under the Companies’ Creditors Arrangement Act proceedings.

QuadrigaCX first came to the spotlight in January 2019 after the death of Gerald Cotten, its founder and CEO, during a trip to India. Cotten’s widow claimed that he had the necessary private keys, which are used to access cryptocurrency holdings. This meant that she could not access more than C$190 million (approximately $146 million in US dollars) in crypto and fiat assets owed to users of the exchange.

A consequent investigation by EY found that Cotton might have misused funds owed to users. This misuse of funds included supporting margin trading for crypto coins such as Omisegod, Dogecoin, and Zcash. In its report, EY said that it could not find over $100 million in funds that the exchange was supposed to have been holding.   

In her ruling, Judge Jamieson noted that EY had incurred huge expenses in administering the CCAA proceeding and trying to recover funds on behalf of the exchange. Besides that, she stated that EY had faced various challenges such as the lack of records and books and trying to access information held by third parties.  

Divvying Up Recovery and Creditor Costs

“This is the first insolvency case in Canada involving cryptocurrency and has presented a number of unique issues, including requiring specialized resources for the monitor’s investigation,” stated Judge Jamieson. EY used specialized tools for the investigation.

The monitor charged $1.3 million while the law firm representing the exchange charged $340,000. Payments will come from $25 million which has been recovered from the exchange.

After expenses, the balance $23.4 million will be distributed to creditors. The monitor is trying to recover additional funds of about $9 million by selling assets owned by the exchange from Gerald Cotton’s estate.

Former users of the exchange will have to fill out a form by August 31. To get compensation, they will need to provide the account number they used on the exchange, their phone number, full name, address, and the amount of each crypto and fiat asset they had in the exchange. For those that are unsure of their holdings in the exchange, EY has created a site where users can verify their amounts. Creditors who disagree with the amounts listed will have to provide necessary documentation to support their claim.   

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