Canadian Bank Freezes $28M Belonging to Cryptocurrency Exchange

Since January, QuadrigaCX, a leading Canadian cryptocurrency exchange based in Vancouver has been embroiled in a conflict with the Canadian Imperial Bank of Commerce (CIBC). Quadriga has had to defend itself in court over CIBC’s decision to freeze $28 million worth of funds in five accounts connected to Quadriga’s payment processor, Costodian Inc., and its owner, Jose Reyes.

Claim and Counterclaim

Canadian news outlet The Globe and Mail reports that court documents filed in the province of Ontario by the CIBC state that the bank’s decision to freeze the accounts stemmed from its inability to determine ownership of the said funds.

In response, lawyers representing the interests of Quadriga in the case wrote:

This court should not succumb to the bank’s unsubstantiated and highly offensive speculation that there must be shady dealings afoot because Quadriga business is a trading platform for individuals trading in cryptocurrencies.

Quadriga’s claim however, is that it owns majority of the money. The customers’ accounts are said to have been credited with an intermediary token, called ‘Quadriga Bucks’. This is used to purchase cryptocurrencies on its exchange. Quadriga makes a case for entitlement with the court, asserting to be “the undisputed owner of majority of the (frozen) funds... and alleges it is being unfairly targeted because of the stigma surrounding cryptocurrencies, which have earned a reputation as being a haven for money laundering.”

Unconvinced by Quadriga insistence in its favour, CIBC requested an “interpleader order”, requiring that the court takes possession of the money and subsequently decide whom to hand it over to among QuadrigaCX, Costodian Inc or the 388 cryptocurrency users who have been affected by the dispute.

“Banking Cartel Conspiracy”

In an email to its clients, Quadriga cites an alleged conspiracy by the “Canadian banking cartel” aimed at curtailing its ability to provide its customers with crypto exchange services in a bid to “stifle bitcoin adoption” in Canada. Quadriga’s CEO, Gerald Cotten stated:

The number of individuals in the bitcoin community that have been shut out of the banking system is staggering.

Subsequent to the crisis, cryptocurrency prices have recorded a spike across all trading pairs, since users can only make deposits with no withdrawals.

Canada’s ‘Big 5’ banks - Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), Bank of Nova Scotia (Scotiabank), Bank of Montreal (BMO), and Canadian Imperial Bank of Commerce (CIBC) - have so far remained silent on the matter, declining to give statements regarding the development. Observers have pointed out that some of Quadriga’s competitors are reportedly working with members of the Big 5, which potentially raises new questions about collusion if a link is established.