A lawyer representing the embattled cryptocurrency exchange QuadrigaCX has recently claimed the firm is now out of money, at a time in which various law firms started pitching to represent the exchange’s creditors, who are owed $190 million in crypto and cash.
According to local news outlet Canoe, lawyer Maurice Chiasson noted during a hearing in the Nova Scotia Supreme Court that “as of today, we don’t have anything,” meaning the firm is now out of funds. Chiasson noted, however, the widow of QuadrigaCX’s late CEO Gerald Cotten was expected to make more money available.
Court documents reportedly reveal the widow, Jennifer Robertson, had already contributed $150,000 to cover operating costs. Chiasson revealed the company’s precarious financial situation at a time in which “more than a dozen lawyers” were heard in the courtroom, to make their pitches to represent QuadrigaCX’s creditors.
Per the news outlet, three teams of lawyers applied to represent 115,000 cryptocurrency traders affected by the crypto exchange’s situation. They’re owed $145 million in BTC, and $52.6 million in fiat.
Justice Michael Wood revealed he would issue a written decision on creditors’ legal representation “within a week,” as tweeted by Canadian Broadcasting Corporation reporter Jack Julian.
Wood is not going to make a decision on rep council, on the makeup of the users committee or the process of choosing either.— Jack Julian (@JackJulian) February 14, 2019
Millions Locked Away
QuadrigaCX itself was shut down earlier this year, following the sudden death of its founder and CEO Cotten, who managed the exchange through his laptop, in which the $145 million in cryptocurrency are currently locked in cold storage. This, as he was the only person with access to the private keys.
After Cotten passed away, the controversial cryptocurrency exchange revealed it lost an additional $400,000 worth of cryptocurrency after accidentally transferring 100 BTC to the cold storage wallet it isn’t able to access.
Recently, the exchange was granted protection from its creditors, but has been ordered to pay all legal fees, which a lawyer representing Ernst & Young said should be capped at $75,200. The cryptocurrency exchanges’ downfall has cost one cryptocurrency trader his $420,000 life savings.
While $145 million worth of crypto are locked in an inaccessible wallet, most of the fiat currency owed to creditors is said to be tied up in bank drafts held by third-party payment processors. Per Robertson, one of the processors alone has five drafts worth millions.
QuadrigaCX was using third-party payment processors as it has been involved in conflict with traditional financial institutions in Canada since late last year.
The exchange’s situation has seen many question whether the exchange’s story – that the funds are locked in an inaccessible wallet – is real. Blockchain research has found that there’s little to no evidence of QuadrigaCX holding funds in cold storage, and has shown there are questionable transactions leading to Poloniex, Bitfinex, and Shapeshift.